Revvity Inc (RVTY) 2004 Q2 法說會逐字稿

Good day, everyone, and welcome to this PerkinElmer second quarter 2004 earning results conference call. Today's conference is being recorded.

At this time for opening remarks, I would like to turn the conference over to the Vice president of Investor Relations and Corporate Communications, Mr. Dan Sutherby. Please go ahead, sir.

Good morning. And welcome to the PerkinElmer second quarter 2004 earnings conference call. If you have not received a copy of our earnings press release, you may get one from visiting our website at www.perkinelmer.com, on the First Call Network, or from our toll-free investor hotline, 877-PKI-NYSE.

Before we begin, we need to remind everyone of the following safe harbor statements: Various remarks that we may make about the company's future expectations, plans and prospects constitute forward looking statements for purposes of the Safe Harbor Provisions under the Private Securities LItigation Reform Act of 1995. Actual results or events may differ materially from those indicated by these forward-looking statements, as a result of various important factors, including those discussed in our earnings press release filed today and in our most recently filed annual report on Form 10-K, and in our most recently filed quarterly report on Form 10-Q, all of which are on file with the FCC.

In addition, any forward looking statements represent our views only as of today. We disclaim any obligation to update forward-looking statements in the future, even if our estimates change. So you should not rely on any of today's forward looking statements as representing our views as of any day after today. During this call, we will be referring to non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures we will use during this call to the most directly comparable GAAP measure is available in our earnings press release, issued yesterday evening, a copy which is available in the investor [INAUDIBLE] section of our website, under the headline "Releases". To the extent we use non-GAAP financial measures during this call that are not reconciled to GAAP in that press release, we will provide reconciliations during the call. I am now pleased to introduce the Chairman and Chief Executive Officer of PerkinElmer, Greg Summe.

Thank you,, Dan. Good morning, everyone. I appreciate you taking the time to join us today to discuss PerkinElmer's second quarter 2004 results. With me today is Rob Friel, our Chief Financial Officer.

I'm going to begin by reviewing the highlights of the second quarter, Rob will then talk in more detail on the financial results, including guidance for the third quarter and the full year. We will break for questions and answers and then close the call. I'm struggling a little bit here with a summer cold, so I'm a little raspy. I may push a few more questions Rob's way than the normal. But overall, we are very pleased with our results this quarter that included double-digit revenue growth, strong operating margin expansion, and significant growth in earnings and excellent cashflow. All the businesses -- all three businesses improved sequentially and year over year.

Our second quarter revenue was 413 million, up 10% over the second quarter of last year. Organic growth, which excludes the effect of foreign exchange fluctuations and any acquisitions and divestitures, was 8%. Each of our three businesses experienced organic growth, which was up sequentially from the first quarter. We also feel good about the second half of the year, fueled by our momentum to the second quarter and the continuing gradual strengthening of our end markets.

Our second quarter EPS was 16 cents on the GAAP, 20 cents excluding intangible amortizations. This is at the higher end of the range of our guidance for the quarter and met the range First Call consensus for the quarter. During the quarter, we were pleased with our operating margin expansion of 140 basis points, or 230 basis points when you exclude the one-time items in the second quarter of last year. This improved profitability was driven by higher revenue, operational productivity such as material procurement savings, quality improvements and regional consolidation of customer care. I'm also pleased to report that the Life Analytical Science integration is now complete.

You will recall that we initiated this major project about 21 months ago. The LAS business is stronger organizationally, operationally and strategically, as a result of this integration, and it's continuing to gain momentum in the marketplace. Our operating cash flow for the quarter was very strong, $57 million -- up 50% from the second quarter of last year. Operating cashflow for the first half of this year was $83 million, up 37% from the first half of last year. This has driven our year to date net debt reductions of about $65 million.

Our balance sheet is the strongest it's been in years, with our net debt to total capital now at 18%. And our cash position is strong at nearly 200 million. We also have made good progress this quarter on our customer excellence program, which was the initiative we launched at the beginning of this year to make PerkinElmer the supplier of choice. Our current priorities are establishing more vigorous metrics and follow-up on customer satisfaction, reducing the cycle time of the order/shipment process, and improving the sales and service tools in training.

You know, it's difficult to put numbers on our progress here, but the qualitative impact is clearly noticeable. All of our employees have a heightened sense for the quality of our customer interactions, and are excited about the tangible improvements in customer satisfaction. Acceleration of our growth is also partly driven by new products. During the second quarter, our Life and Analytical Sciences business launched 13 new products, including the DELFIA Xpress Phase II. The DELFIA Xpress Phase II is a fully-automated random access analyzer, which together with a range of [INAUDIBLE] and software provides assistance-enabled rapid prenatal screening of disorders.

It helps the doctor provide comprehensive risk assessment during the first or second trimester. I would say this is product is available only outside of the U.S., pending FDA approvals. LAS also introduced a battery of new high through-put [PHONETIC] screening ratings since this quarter, which include the FlashBlue TPCR, which complements our suite of high through-put screening ratings. This is the first in a series of products enabling homogeneous radiometric [INAUDIBLE] and strengthens our leading position in GPCR receptors and ligans [PHONETIC] for HDS and drug profiting. We will also introduced a number of HDS targets for neurogenerative diseases such as Alzheimers and other ranges for use with our Alpha Screen System.

In optoelectronics during the quarter, we had several key business wins. Our fastest growing area in optoelectronics is our amorphous silicon digital x-ray business. In this area, we continue to make great strides in both diagnostics and radio therapy growth, with major LEM customers such as ELECTA, who continues to take share in their market. Lockheed Martin has also notified us that they have selected PerkinElmer as a key supplier in the joint common missile program, a very significant long-term program that we will talk more about in the future. With its [INAUDIBLE], were awarded a design in for our first rear projection TV win with a major OEM customer, and are furthering our efforts with SONY in the quality of high-end front projector [INAUDIBLE], launched earlier this year. Both of these programs use our ceramic xenon light engine.

Also, we continue to gain LA momentum on our camera phone flash technology that is replacing LEDs for camera phones with high mega pixel requirements. We had several design in wins during the quarter with major cell phone OEMs in Korea. We're excited about the longer-term growth prospects of this technology, which is the only camera phone flash in the world.

In fluid sciences, as we announced this quarter, we were selected by Rolls Royce to be the sole source supplier of brush seals for the next five years. We assumed the production of the Rolls Royce brush seal product line, which strengthens the strategic relationship between the companies and provides Rolls Royce a cost-effective, low-risk alternative. Fluid Science was also recognized by Cessna for our role as a key partner during their recently-completed solvent certification program. We believe the operational momentum in the first half of 2004, coupled with the continuing recoveries of our key end markets, enables us to increase our EPS guidance for 2004. We believe we can deliver cash EPS of 81-86 cents per share, which is GAAP EPS, excluding the intangible amortization of 15 cents per share.

I will now turn the call over to Rob Friel, who will talk about financial results and guidance for Q3 of this year in more detail, and then we will move on to questions. Rob?

Thank you, Greg, and good morning. This morning, as Greg mentioned, I will provide some details on our revenue, cost and cash flow for the second quarter; then as we have done historically, I will discuss guidance for the next quarter and then open the call for your questions. Before I get into specifics, I want to clarify that whenever I talk about a particular measure being up or down, I am referring to an increase or decrease in that measure during the second quarter of 2004 compared to the second quarter of 2003, unless I say otherwise.

Starting first with revenue, as Greg mentioned, our sales for the second quarter of 2004 were 413 million, up about 10% from 376 million in Q2 of last year. By segment, reported revenue growth was 5% in Life and Analytical Sciences, 7% in optoelectronics, and 44% in fluid sciences. Roughly 50% of our revenue is outside of the U.S. So the effect of a weaker dollar relative to Q2 03 was to increase sales approximately 2 percent. As a result, our revenue growth in Q2, excluding the effects of foreign currency fluctuations, was 8%. The foreign exchange impact on revenue by segment was 2% in LAS, 1% in optoelectronics, and less than a percent in fluid sciences.

Sequentially, all segments increased in revenue growth in Q2 over Q1, excluding the effects of foreign exchange. We were also pleased to see growth across all regions in the second quarter, with the Americas experiencing the strongest growth. Geographically, revenue in the Americas has represented about 53% of the Q2 '04 total, and was up 14% on a reported basis. Revenue in Europe, which represented about 32% of our revenue for the quarter, was up about 3%; and Asia, representing about 15% of our revenue for the quarter, was up 8% for the quarter.

As Greg also mentioned, we had very strong operating margin improvements. GAAP operating margin in the second quarter was 9.5%, and excluding tangible amortization, operating margin was 11.2%. Relative to the margins reported last year, that is over a 100 basis point improvement. And excluding gains on asset sales and restructuring reserve reversals in Q2 of last year, the operating margin increased over 200 basis points, with each SBU increasing operating margins over 100 basis points. Sequentially, operating margins have increased about 200 basis points from Q1 of this year. Operating income from continuing operations increased 29% to 39 million from 30 million in Q2 '03, reflecting lower SG&A as a percentage of sales and the higher volume.

In Q2 '04, we repayed another 15 million of our term loan, that resulted in a non-cash $400,000 charge for extinguishment of debt relating to the write off of the portion of the original issuance cost. Interest expense net of interest income in Q2 of this year was 8.9 million, down over $4 million from Q2 '03, due to both the significant debt pay down over the last 12 months, as well as the favorable renegotiation of the terms in some of our debt earlier this year.

Since the end of Q2 last year, total debt has been reduced by 257 million, which includes 157 million of the convertible debenture, and 100 million of the term loan. The tax provision of 8.5 million for the second quarter of 2004 reflects a tax rate of 29%, which is lower than last year due to improved geographic mix of pretax earnings, but consistent with the Q1 rate and our guidance for this year. Q2 '04 net income from continuing operations was 20.9 million, up 91% from Q2 '03, when net income from continuing operations was $11 million. Q2 '04 GAAP EPS from continuing operations increased to 16 cents from 9 cents in Q2 '03, up 78%.

Total shares outstanding are up from Q2 '03 to just over 129 million, primarily due to the impact of our higher stock price through the end of Q2 '04, increasing the number of stock options that must be factored into our fully diluted shares outstanding. Excluding intangible amortization, our EPS was 20 cents in Q2, up 67% from 12 cents last year. If you would now turn to the segment results: We have presented results for the second quarter of 2004 compared to the comparable 2003 period. All of the revenue growth that I will discuss is on a reported basis and includes the impact of foreign exchange.

In LAS, revenue in the first quarter was 258 million, up 5%. In a GAAP basis, LAS operating profit from second quarter of 2004 was 22.1 million, or 8.6 percent of sales. Excluding intangible amortization, LAS Q2 '04 operating profit was 28.7 million or 11.1% of sales. The Q2 '03 operating profit included restructuring reversals of 2 million, and gains on disposition of 1 million, with both of these items aggregating 120 basis points of sales to the period sales period.

Therefore, adjusting for these items, operating margin expanded 130 basis points. Instrument sales, which represented about 47% of LAS sales for the quarter, were up about 10%. This was driven by very strong growth in environmental and chemical, as well as good growth in our high through-put screening instruments. Sales of [INAUDIBLE] consumables, which make up about 31% of LAS' sales, were down slightly in the quarter. The timing of certain large customer orders and genetic screening, both in Q2 of last year and in this quarter, resulted in a slight decline of reagents [PHONETIC]. We are confident this is a timing issue, and we expect our reagent growth to return to mid to high single digits in the second half of the year.

Service, which represented about 22 percent of our LAS revenue in Q2 '04, grew 6%, as we continue to see good traction on our one-source initiative launched early in 2003. We continue to see a lot of interest from our customers, as they view this as an opportunity to improve on our productivity by having a single-service supplier whose job is to keep their lab working rather than just maintaining one or two machines. Looking at our LAS by product line, biopharma sales, which represented 42% of LAS revenue in the quarter and includes [INAUDIBLE] discovery tools and pharmaceutical QA and QC, but excludes the service revenue associated with those products, was up about 1%. In environmental and chemical product lines, which represented about 26% of our LAS revenue in the quarter, Q2 '04 revenue was up 11%. We experienced continued strength in the ICPNS and GC products, with particular strength in the Americas.

Over the last four quarters, this business has averaged 10% revenue growth. In genetic screening, which was about 11% of LAS' revenue in the quarter, revenue is up 3%, while we are encouraged that the timing of orders that I mentioned previously will continue to improve the second half growth. The benefits of this type of screening are becoming more and more evident, and have recently been capturing a lot of media attention.

As the clear market leader in neonatal screening, we should benefit from this and expect our growth in this area to the in the mid teens in the back half of the year. In optoelectronics, revenue for the quarter was 95 million, up 7%. Optoelectronics' GAAP operating profits for the second quarter of 2004 was 12.9 million, or 13.7% of revenues. Excluding intangible amortization, operating margin was 14%. The operating profit for Q4 of last year included restructuring reversals of 700,000 and a small gain on disposition, with both of these items aggregating about 1% of sales for the period.

Excluding these items, operating profit for Q2 '04 was up 160 basis points, due to higher volume and improved factory productivity. Within optoelectronics, imaging revenue grew 20% during the quarter. We shipped a record number of our multi-silicon digital X-ray panels this quarter, and in the end market demand within medical applications remained strong.

We are also seeing excellent traction of our digital x-ray technology in the therapeutic end markets, including radiotherapy, as well as industrial applications such as non-destructive testing. Specialty lighting expenses were down steadily compared to Q2 of last year, but up high single digits sequentially from the first quarter of this year. In photography, film-based photography is declining faster than the increase of digital still cameras and camera phones, which is having a short-term detrimental impact on our lighting business as we manage through this transition.

Turning to fluid sciences, revenue was 60 million, up 44%. This revenue growth drove GAAP operating product of 9.2 million or 15.3% of revenue, a significant improvement from Q2 '03 operating margins of 3.1 million or 7.5% of revenue. Operating profit, excluding intangible amortization, was 9.5 million for second quarter of 2004, or 15.7% of revenue. The significant revenue increase drove the strong margin expansion, with operating margins basically doubling from Q2 '03.

During Q2 '04, within fluid sciences, the aerospace segment, which was about 57% of the revenue, was up over 40%, with solid contributions from both our OEM business and repair and overhaul. We continue to see recovery in the end markets, as evidenced by Boeing and Aerobus this months, and there have been plans to increase output through 2006 and 2007 to meet rising demands. The semiconductor business, which represented about 28% of fluid sciences' revenue in the quarter, increased 78% from Q2 '03, as that market continues to ramp up after the longest down cycle in it's history.

For PerkinElmer, semicon now represents about 4% of our total revenue. Turning to the balance sheet and cashflow. During the second quarter of 2004, we generated 57 million of operating cashflow, up 54% over Q2 of last year. Free cash flow, which we define as operating cash less capital expenditures of 5 million, equalled 52 million in Q2 '04. This compares to Q2 '03 operating cashflow of 37 million, capitol expenditures of 5 million, and free cash flow of 32 million.

During the last 12 months, the company has generated operating cash flow of 190 million, equivalent to about $1.50 for each share outstanding. Increased net income, reduced restructuring outlays, lower tax payments and the timing of certain accruals drove the improved cash flow performance during the second quarter. Working capital turns increased a half a turn to 4.9 from 4.4 turns in Q2 of last year.

We continued to deliver the balance sheet in Q2 by paying 15 million of our term loan, taking the balance down to 185 million at the end of Q2. Our total debt at the end of Q2 was 489 million, and cash and equivalents were 197 million, so total debt with cash and equivalents 292 million. Total debt, net of cash and equivalents as a percentage of total capitol, was 18% at the end of Q2, and our ratio debt net of cast to EBITDA is 1.2.

With our strong liquidity and cash flow generation, we plan to increase our investments in R&D to fuel high growth potential opportunities, and we will selectively target business development opportunities that we believe present solid value [INAUDIBLE] potential to build on our existing strengths. Now let me briefly discuss our guidance for Q3 and then open the call for your questions. Based on trends in our end markets currently and our momentum in the first half of 2004, we expect Q3 revenue growth to be similar to Q2, in the range of 8-10%.

We expect Q3 '04 operating margins to expand about 50-100 basis points over Q2 of '03 and sequentially over Q2 of this year. This would result in GAAP EPS from continuing operations in the 15 to 18-cent range, an improvement in the range of 46 to 64% over Q3 '03 EPS from continuing operations. The estimated EPS impact of intangible amortization should be 4 cents in Q3 '04, with Q3 '04 EPS, excluding amortization, forecasted to be in the 19 to 22-cent range. For the full year of 2004, we have increased our EPS guidance from 62 to 67 cents on a GAAP basis to 67 to 71. The mid-point of the range would represent an increase of over 50% from the 2003 GAAP EPS.

The estimated EPS impact of intangible amortization should be 15 cents for the full year 2004. And therefore, our new guidance, excluding amortization, is in the range of 81 to 86 cents. I will now open the call to your questions.

Thank you, the question and answer session will be conducted electronically. If you'd like to ask a question, you can do so by pressing the star key followed by the digit one on your touch-tone telephone. If you are using a speakerphone, please release your mute function to allow your signal to reach our equipment. Again, that is star one to ask a question. We'll pause for just a moment to assemble our queue. And we will take our first question from Paul Knight from Thomas Weisel Partners.

Hey, Rob, can you talk about the tax rate, what that should be going forward; the other income line, as well -- anything special there?

Well, you know, as you mentioned, in Q1, we took our tax rate down to 29% because of the improved profitability. And that manifests in two ways. One is, we're not losing money overseas in our some of our operations, so we don't have net operating losses for which we can't get a tax benefit for. And the improved profitability domestically, which is driven largely by the lower interest expense, and the improved profitability of fluid sciences allows us to use some tax credits that we had built up in the '02-'03 time frame. And so my expectation for the rest of the year would be no higher than 29%, and hopefully we can see that continue to trim down a little bit as we continue to improve our profitability. And I would say in other income and expense, you know,I think we will continue to work down our debt, so you'll see, you know, that extinguishment of debt cost. But I don't think it will be any different than what you probably saw this quarter.

And your organic growth in Life and Analytical Science, the best in -- I don't know, a few years. Can you talk about that?

Yeah, you know, I think generally we are seeing some nice momentum in our end markets. You know, Greg talked about the point that, you know, the integration is complete. So we've got some good stability in the organization. I think -- you know, I think that's paying dividends. And you know, our move to our key account focuses, is -- I think is paying nice benefits as well. So I think we are cautiously optimistic that we continue to see improved organic growth in LAS. [OVERLAPPING SPEAKERS]

Paul, the only other comment is that, starting in the first quarter of 2002, the biopharma segment took a sharp drop, and that has gradually sort of continued to come back and get a little bit stronger each quarter.

Is U-LUX [PHONETIC] your fastest selling product?

Is U-LUX the fastest what?

The fastest selling product in your group?

You know, its selling quite well. I don't know if it's the fastest. Envision did quite as well -- did well also in the quarter. So we're seeing strength in both of our high end, high through-put screening instruments.

Okay. Thanks.

Thank you, we'll next to to Larry Neibor with Bear Stearns.

Good morning.

Thank you, good morning. Now that you're starting to get some significant operating leverage on your volume gains, what type of annual increases and operating margin are you targeting for the next couple of years?

You know, Larry, we have talked historically about if we can get revenue growth in the high single digits, we should be able to get operating margin leverage in the 100 to 150 basis points. And I think, you know, we feel fairly confident we can continue to achieve that. We have got -- as you know -- pretty good gross margins in all our businesses. So we would expect to be able to get nice leverage in on that operating margin.

Okay, secondarily, the decline that you saw in reagents and consumables in this quarter, do you expect -- I think you said you expected that to reverse itself in the second half and show a gain?

Right. And one of the things that we see periodically is within genetic screening, we have a number of large orders that occur. And depending on the timing of those in any one quarter, it can move the growth rate. So for example, if you look back at Q2 '03, we had some large sales orders that occurred; and in Q2 of this year, we had a couple that moved out. So as we look at the opportunities in the back half of the year, we are fairly confident that we will return to sort of mid to single high digits on our reagent. We've always been driven by this sort of lumpy sales pattern within genetic screening.

And I think on the biopharma side, you know, we think that that will get a little bit stronger for us going on the back half. But the bigger effect is genetic screening.

Okay, thank you.

You're welcome. And now from Needham & Company, John Harmond.

Good morning.

Hello, good morning. First of all, based on your comments saying that the integration of Life and Analytical Sciences is complete, what does that do for your cost savings plan? What did you achieve, and where does it go? Does it -- excuse me -- does it slow down to a trickle from now on?

No, you know, when we started off with the integration, we talked about savings in the, you know, 30 million to 45 million-dollar range that we would achieving at the end of '04. And as we have communicated a number of quarters, we have actually overachieved that from the standpoint of bottom line savings from the integration. So I think we feel, you know, great about the progress we've made there. As far as going forward, we will still see some benefits in the back half of the year, as some of the actions we took in the latter part of '03 flow through. So I think from the pure integration, you will continue to see some benefits in the back half of the year. But I think going forward, I think the improvements within SG&A will be largely from a leverage perspective. So our expectation now is we've got an organization now that can, you know, flow much higher revenue through. And so we would expect the benefits from an SG&A perspective to be more from a leverage perspective. Having said that, we haven't rested on our ability to drive productivity and get more efficient. But I don't think you will see the large reductions in cost that you saw in '02 and '03.

Great, thank you. And my second question, last quarter you gave a revenue breakdown from you optoelectronic business, but you didn't this quarter, do you have those numbers handy?

Yes, revenue breakdown from the standpoint of imaging and sensors?

Right, percent of sales, yeah.

Right, so imaging in Q2 '04 was about 27 million, and as I mentioned, growing about 20%. Specialty lightening was 32, and sensors and others, some small product lines, was about 35. And as I mentioned, specialties in lighting and sensors scales were down low single digits. So in the 1-3% range.

That's great, thank you.

You're welcome.

Thank you, and as a reminder, if you have a question today, you can press star one. We will now take a question from Daryl Party with Merrill Lynch.

Good morning.

Good morning. Can you discuss a little more, you -- you're seeing some nice strength in the environmental and chemical aspect of LAS. Could you give us some insight into end markets that are strong and geographies? You mentioned specific products and that North America was strong, but I was wondering if you can dig in a little deeper.

Well, I think the environmental and chemical market is driven by sort of two levers. One is air/water quality in the developing world, so that's China, India, etcetera, and the second is bioterrorism aspects in the developed world. So I think it' a combination of that market being fairly strong and new products that we have introduced over the past several years. So we feel very good about our competitive position in that arena, and have been quite successful in the sales side with some underlying strength by those two trends.

Okay. And with respect to R&D, when we started off the year, you talked about potentially picking up R&D as a percentage of sales to maybe closer to 6%. We're seeing some growth now in a dollar base in R&D. I was wondering if you can comment on where you can see R&D spending going from here, and also give us an update on potentially some of the projects that you're working on and where those are.

Yeah, this is Rob. From an R&D perspective, I think we would like to see -- continue to sort of migrate that closer to 6% and 5%. So I think you're seeing the back half of the year, you know, us ramping that up. One of the reasons why -- and I mentioned this last quarter -- you don't see as significant a ramp up in the first half is because we did take productivity actions in the R&D area, where we really went the center of excellence within LAS. And so what you are seeing is some productivity and some reduction in costs masking some actually absolute increases in people. And so in the back half of the year, I think will you see that sort of ramping up as a percentage of revenue.

You know, and as far as specific projects, we don't talk about specific projects until they come out. But just to give you sort of a sense, if you think about, you know, electronics, clearly we're spending a lot in the imaging area. We're also spending a lot in the consumer -- consumer applications-- both the camera phones and projection televisions. Because both of those are very significant potential applications for us going down the road. Within LAS, we are spending a fair amount in the whole genetic screening area, neonatal, prenatal, and some areas of molecular diagnostics. We're also continuing to spend in the drug discovery tools arena, particularly in the cellular sciences area and some of the reagent lines.

Okay, great. Thanks.

You're welcome.

And we will now take our next question from Tom Durnell, he's a private investor.

Operator, we're having a hard time hearing you. So when you introduce people, can you be a little louder, please.

Yes, sir. And Mr. Durnell, your line is open.

Yes, okay. Greg, the share price weakness here has been very significant in the last 12- 14 days, any explanation here?

No, I don't have any explanation for it. I mean, it really started beginning of July. And I think it was just sort of speculation on -- on quarterly results. I mean, we can't do much about that. It's sort of -- I think it was just sort of speculation in the market as to what the quarter -- you know, part of this started with some weakness in the tech sector. I think, you know, you had the software companies who were kind of weak, and then some of our peers had a little bit of a disappointment. And so, I think it was just sort of speculation wrapped around that, that's the only thing I can tell you.

Huh-uh. Okay. Well, thank you, Greg.

You're welcome.

And as a reminder, if you have a question today, you can press the star key followed by the digit one on your telephone. We will now take a question from Keith Curtis with Grant Point Capitol.

Good morning.

Goods morning, guys. Can you guys just comment on internal growth expectations in the Life Sciences business going forward, I guess sequentially in the third quarter?

You know, as we think about the back half of the year, I think we would look for organic growth to accelerate from the first half. So I would say probably in the mid single digits. So if you look at the first half, we did 1% in the first quarter, we did 3% in the second quarter. I think our expectation would be something closer in the 5-6% in the back half.

That's just in the Life Sciences business?

Right.

Okay. And do you guys care to break out profitability in terms the mix in fluid sciences? Do you break that out by segment, or no?

No, generally what we do is we give revenue growth. Clearly, all the segments are quite profitable, whether it's aerospace or semicon.

Okay. Perfect, thanks guys.

Yep.

And as a final reminder, if you have a question today, you can press star one. We will pause again for just a moment. And gentlemen, it appears there are no questions in the queue at this time. I would like to turn the conference back over to you for any additional or closing remarks.

All right. Well, look, thanks everyone for your questions. As we have discussed today, we feel good about our progress in the second quarter in the first half and the momentum it generates for the third quarter and the remainder of 2004. As we continue to execute on our strategy and as the end markets in the economy continues to improve, we believe this will translate in increased value for our customers, employees and shareholders. So thanks for your time today and for your interest in PerkinElmer. This call is adjourned. Have a great day.

Thank you, and that does include our conference today. We would like to thank everybody for their participation. You may disconnect at this time.