Revvity Inc (RVTY) 2005 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for your patience. Welcome to the fourth quarter 2005 PerkinElmer earnings conference call. My name is Bill and I will be your conference coordinator today. [OPERATOR INSTRUCTIONS] I would like the turn the conference over to your host. Mr. Steve Delahunt, Director of Treasury and Investor Relations. Please proceed sir.

Thank you. Good afternoon and welcome to the PerkinElmer fourth quarter 2005 earnings conference call. If you have not received a copy of our earnings press release you may get one from our website at perkinelmer.com or from the First Call Network or from our toll-free investor hotline at 1-877-PKINYSE. This call is being webcast today from our website, and we are providing a slide presentation accessible from the website to facilitate the discussion of our Q4 results. For your information during the call, the pages on the webcast can be advanced from your computer as we proceed through the presentation.

Before we begin, we need to remind everyone that on this call we will make forward-looking statements including statements concerning the plans, objectives, and future financial performance of PerkinElmer. The actual results may differ materially from those indicated by any such forward-looking statements as a result of various important factors including those contained in our SEC reports. We encourage to you read those SEC reports. Also 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 date after today.

During this call we will be referring to certain non-GAAP financial measures. The reconciliation of the non-GAAP financial measures we plan to use during this call to the most directly comparable GAAP measure is available in our earnings press release issued earlier this afternoon and we have also provided reconciliations in the appendix to today's presentation on our website. 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 promptly.

I am now pleased to do introduce the Chairman and Chief Executive Officer of PerkinElmer, Greg Summe.

Thank you, Steve. Good afternoon, everyone. I appreciate you joining us to discuss PerkinElmer's fourth quarter 2005 results. With me today is Jeff Capello, our CFO and Rob Friel, our Vice Chairman and President of Life and Analytical Sciences. I will begin by reviewing the highlights of the quarter. Jeff will provide more detail on the financial results, and then we'll break for questions and answers and then close the call.

We are pleased with our progress this quarter which completed a very successful year for PerkinElmer. In 2005 we delivered very strong EPS and cash flow growth while focusing our business portfolio on health sciences and photonics and dramatically strengthening our balance sheet. We enter 2006 with higher growth businesses, a strong organization, robust operating processes and excellent financial capability.

Let me touch on the highlights of the fourth quarter. The financials are complex, because we had several significant transactions which result in a number of one time items, the net of which is very positive. While Jeff will get into the detailed financial results I want to hit the high points. Our adjusted fourth quarter of EPS of $0.36 exceeded consensus and increased 29% from the fourth quarter of last year. Our full year EPS of $0.95 was up 30 plus percent. Our adjusted operating margins expanded 170 basis points in the fourth quarter and up 140 basis points for the full year. Our free cash flow was $75 million for the fourth quarter and $182 million for the year, $1.39 of free cash flow per share. Our working capital turns increased more than a half turn to almost six turns. Our free cash flow in conjunction with the divestiture gains enables us to strengthen our balance sheet. We ended the year with over $250 million of net cash.

In the fourth quarter our reported revenue was $387 million. Down 6% year-over-year. This seems surprising, but as we discussed at the end of last quarter and at the end of Q4 of last year, 2004 had an additional week, in the Q4 fiscal period. An average week is 7% of the quarter's activity. If you adjust for the additional week, the impact of foreign exchange and acquisitions, our organic revenue was up 4% for both the fourth quarter and for the full year.

In addition to the strong financial results we also continue to see good momentum in a number of businesses including genetic screening, medical imaging, and service. The genetic screening business continues to generate excellent revenue growth with a 21% organic growth rate in the fourth quarter and an 18% organic rate for the full year. As we continue to expand the business around the entire human reproduction cycle, neonatal, prenatal and maternal health. The outlook in neonatal screening continues to be strong as additional states move toward a standard of care of 29 tests and internationally in the fourth quarter PerkinElmer was selected by the country of the Netherlands and the province of Ontario Canada for their expanded newborn screening programs. We also continue to see progress in the emerging markets as the awareness and acceptance of the benefit of prenatal and neonatal screening continue to grow. This awareness will be further helped by a land mark research report which will soon be released.

Our medical imaging business had organic revenue growth in the fourth quarter of 2005 of 7% compared to the fourth quarter of 2004 and 10% for the full year. If you just look at our digital X-ray flat panels, our organic growth was close to 20% for the year. We continue to see very strong demand but remain somewhat capacity constrained in the production of our flat panels. As we've discussed previously we are continuing to invest in the business to increase production capacity but the build up of capacity is taking time. We expect capacity issues to be resolved in the second quarter of 2006.

In business development we finalized several growth initiatives including a strategic partnership with Luminex which will build on our research and development efforts in multi-plex assay technology, both for diagnostics and research markets. Also the acquisition of Biomatic, a provider of lab compliance and validation services, extends the capability of our one source laboratory service business.

Several new product introductions launched late in the year in the Biopharma segment are helping us begin to shift our mix including our BioEXPRESSION, Biomarker discovery platform for protein Biomarker discovery and our LumiLux cellular screening platform for ion channel screening; also the new Spectrum 100 series of infrared spectrometers launched in November shows -- a strong sales trajectory into the new year. In addition, this week we introduced the JANUS II automated workstation platform at lab automation which will provide laboratories with great flexibility and through put capacity and dynamic volume -- dispensing volumes to meet the liquid handling automation needs.

We also announced several key management appointments that continue to strengthen our leadership team. Rob Friel has been named President of Life and Analytical Sciences. He succeeds Peter Coggins who will remain with us as a senior advisor until mid-2007. Also Aaron Geist, who has been on many of these calls in his capacity as investment analyst with Baird, has joined the Company as Vice President of business development and Karl Hecker, who is our new research and development leader for our center of excellence on drug discovery reagents.

Based on our 2005 results and our momentum in early 2006, we are reconfirming our 2006 financial guidance of organic revenue growth of 5 to 7% and earnings per share excluding intangible amortization in the range of $1.00 to 1.25, which is growth in excess of 25%. Looking ahead to the first quarter of 2006, earnings per share, excluding intangible amortization, is projected to be $0.21 to $0.23 which is growth in excess of 30%. These 2006 projections do not take into account stock option expensing or any impact from the planned divestiture of our semiconductor business which we anticipate occurring in the first quarter of 2005.

I will now turn the call over to Jeff Capello who is going to discuss our Q3 --- our Q4 results in greater detail. Jeff.

Thank you, Greg. Good afternoon. This afternoon I will provide some details on our revenue, costs and cash flow for the fourth quarter and full year 2005. Then briefly discuss guidance for 2006 and Q1 2006 before I open the call to your questions.

Before I get into the specific financial results for the quarter, I want to remind everyone the results for our Fluid Sciences business segment are accounted for as a discontinued business consistent with our press release on October 6 when we announced our intention to sell the three businesses that make up the segment. Therefore most of the discussion this afternoon will focus on our continuing operations. I also 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 fourth quarter of 2005 compared to the fourth quarter of 2004. To the extent I use any non-GAAP measures, those have been reconciled to the comparable GAAP measure in the appendix to this presentation on our website.

Turning first to revenue, as Greg mentioned, we finished the year with sales for the fourth quarter of 2005 on a reported basis of 388 million, down 6% from 412 million. As noted by Greg, the fourth quarter of 2004 had an extra week of activity driven by our fiscal calendar. This issue arises every six years to ensure that our fiscal calendar does not fall out of alignment with the regular calendar year. For comparability purpose, we are estimating the benefit of the extra week to be an average week of sales in the fourth quarter of 2004, which equates to a benefit of 7% for the fourth quarter of 2004 and 2% for the year 2004. All of the organic revenue growth rates I will mention on this call will remove the estimated impacts noted above as well as the impact of foreign exchange and acquisitions.

On our organic basis, revenue grew 4% for the quarter with Life and Analytical Sciences by 2% and Optoelectronics by 8%. The effects of a stronger dollar in Q4 of '05 relative to Q4 of '04 decreased sales by 3% for the Company, 3% for Life and Analytical Sciences and 2% for Optoelectronics. In addition the impact of our Elcos acquisition within Optoelectronics, which was completed in the second quarter of 2005, increased sales by 3% for Optoelectronics and had no material impact to the Company.

Geographically we experienced growth across all regions in the fourth quarter on an organic basis. In the Americas revenue which represents approximately 45% of our revenue for the quarter was up 3% organically. Revenue in Europe which represented about 36% of our revenue for the quarter was up about 2% and Asian revenue representing about 19% of revenue for the quarter was up 9%.

The full year 2005 revenue was 1.47 billion or 3% higher than the 1.43 billion in 2004 on our reported basis. On organic basis revenue increased 4% for the Company, 4% for Life and Analytical Sciences, and 6% for Optoelectronics for the full year. The impact of the Elcos acquisition increased revenue by 3% for Optoelectronics and 1% for the Company for the full year. Foreign exchange had an immaterial on revenue on the full year.

GAAP operating income for the fourth quarter of 2005 was 49.8 million compared to 54.4 million in the fourth quarter of 2004. Excluding a restructuring charge of 7.5 million and amortization expense of 7.2 million our Q4 '05 operating income was 64 million or 16.6% up from 14.9% from Q4 '04 which excluded amortization charges of 6.9 million. For the full year 2005 operating income increased to 141.3 million from 137.7 million; excluding the restructuring charge in 2005 operating income expanded 18% and operating margins expanded 150 basis points in 2005 versus 2004.

Booking expenses [inaudible] operating, interest expense, net of interest income in Q4 of 2005 was 3.3 million down 4.7 million from Q4 2004 due to significant debt reductions over the last twelve months in our strong cash flow. Also during Q4 we incurred a charge for 48.7 million related to the extinguishment of our subordinated debt. The components of this charge are a premium to repurchase our subordinated notes, fees on the unwind of related interest rate swaps and a non-cash charge related to the write off of the remaining original issuance cost.

The tax provision for the fourth quarter of 2005 was 2.9 million. During the quarter we recorded an additional charge of 8.8 million for the tax costs of repatriating our overseas cash; given our decision to repatriate this cash as a result of favorable treatment on the new tax law. This represents the final portion of the accrual which allowed us to repatriate approximately 550 million. This is the major reason why the tax rate seems high, relative to income. As a result of the items discussed above we recorded a net loss from continuing operations of 5.9 million or $0.05 per share in the fourth quarter of 2005 compared to net income of 32.5 million or $0.25 per share in the fourth quarter of 2004.

During Q4 '05 we closed the sale of our aerospace and fluid test divisions of our Fluid Sciences business which together with the sale of our lithography division within our Optoelectronics business unit generated an after tax gain of 191 million. The operating results of these businesses have been classified on the income from continuing operations line of [discontinued] operations on the income statement. The net result of the operating performance and transactions described above is net income of 187.8 million or $1.45 per share for the fourth quarter of 2005 compared to net income of 37.9 million or $0.29 a share in the fourth quarter of 2004.

Since we had a number of special items in Q4 I've provided a walk from total GAAP net income and EPS to our adjusted EPS and earnings. We have also provided a reconciliation of GAAP earnings and EPS from continuing operations to adjusted EPS on a continuing operations basis in the box at the bottom of our income statement attached to the press release.

Turning to page three of our presentation, we present the reconciliation of Q4 '05 GAAP earnings and EPS. In summary, the gains on discontinued businesses and income from discontinued operations increased earnings by $1.49 per share whereas the debt refinancing, restructuring and tax charges decreased earnings by $0.37 a share and intangible amortization decreased earnings by $0.03 a share. The net effect of these items was an increase to earnings of $1.09. If you exclude these items from total GAAP EPS of $1.45, our adjusted continuing operations EPS is $0.36 which exceeded the Thomson First Call estimate and was in line with our previous guidance. On a full year basis total net income increased to 268.3 million or $2.05 a share versus 96 million or $0.74 per share. Both of these line items were significantly impacted by unusual events.

On page four of our presentation we present a reconciliation of GAAP 2005 earnings in EPS. In summary, the gain and income from discontinuing operations on discontinuing activity of $1.54 per share increased earnings whereas the debt refinancing, restructuring decreased earnings by $0.38 a share, partially offset by increased earnings of $0.08 for net tax benefits. Intangibles amortization decreased earnings by $0.14 per share. The net effect of these items was an increased earnings of $1.10. If you exclude these items from our reported total earnings per share of $2.05, our adjusted EPS from continuing operations is $0.95, in line with our previous GAAP guidance.

Turning to our segment results, I will briefly describe our Q4 performance. All of the revenue growth that I will discuss is on an organic basis. In LAS revenue in the fourth quarter was 286 million up 2% on an organic basis. On a GAAP basis LAS operating profit for the fourth quarter of 2005 was 46.2 million compared to 46.6 million for the fourth quarter of 2004. Excluding restructuring charge and amortization intangibles, LAS Q4 operating margin would have expanded 190 basis points to 19%. In genetic screening, which is about 13% of LAS' revenue in the quarter, revenue was up 21% with all geographic regions delivering strong growth in the quarter. As Greg mentioned, we are very pleased with our growth in neonatal and continue to see strong growth opportunities in both expanding our neonatal business to emerging markets and developing new tests in the maternal and prenatal areas.

In the environmental and chemical product lines which represented 27% of LAS revenue in the quarter, revenue increased 1% organically. We had very strong performance in our inorganic product lines particularly our ICP and ICP mass spec where we continue to see international government efforts to improve air, water and overall environmental quality and address bioterrorism concerns.

Biopharma sales, which represented 38% of LAS revenue in the quarter and includes drug discovery tools and pharmaceutical QAQC but not the service revenue associated with those products was down 5% organically. Within Biopharma certain businesses showed improvement in year-over-year revenue growth versus Q4 '04. Specifically, our multi-label detection instruments which grew double digits organically. We are beginning to see some signs of the results of our NPI strategy take hold as we leverage our strong multi-label detection and biochemistry reagent positions into the higher growth areas of cellular high throughput screening in the field of biomarkers. In the fourth quarter of 2005 for example we began to see increased interest in both our cellular screening assays and detectors.

Service, which represented about 22% of our LAS revenue in Q4 '05 grew 8% organically, as we continue to see good traction in our one source business. The outlook for our service business continues to be very strong as our one service business continues to gain traction and we continue to add to our organization capabilities.

In Optoelectronics revenue for the quarter was 101.2 million up 8% organically. Optoelectronics GAAP operating profit for the fourth quarter of 2005 was 11.3 million or 11% of revenues. Excluding intangibles amortization and the restructuring charge, operating margin was 17.6% which represents an increase of 40 basis points compared to the fourth quarter of 2004. Within Optoelectronics, imaging revenue grew 7% organically during the quarter driven by digital X-ray technology which goes into both diagnostic and therapeutic end markets including radio therapy as well as industrial applications such as non-destructive testing. As mentioned previously, we continue to see very strong demand across all applications. We continue to be capacity constrained in our fab which held back our growth for the quarter.

Specialty lighting was up 3% organically compared to Q4 of last year where the growth in digital camera photo flash and Cermax Xenon light engines business more than offset the contraction in our single use camera business. We continue to see strong acceptance of our new products within the consumer electronics area and expect that growth to accelerate as we enter 2006. Sensors revenue was up 11% organically driven by growth in our general, industrial, offset by softness in our military end markets.

Now turning to page five in our presentation, I will give you overview of our Q4 '05 and full year cash flow and certain balance sheet metrics. As I mentioned earlier, we continue to generate strong cash through earnings growth in the Company's ongoing commitment to cash flow. Cash flow for the fourth quarter of 2005 was driven by growth in adjusted net income after adjusting for debt extinguishment and restructuring as well as working capital improvement. Working captain had a 0.6 turns improvement year-over-year as we continue to drive improvements across all the components. Cash flow for Q4 was 75 million, an improvement of 15% over the fourth quarter of 2004. Full year cash flow was 182 million or $1.39 per share.

Our continued strong cash flow has allowed the Company to strengthen and restructure the balance sheet. We finished in the year with over 500 million of cash up from 166 million from last quarter and up from 198 million in Q4 '04, driven large by the proceeds from the divestitures as well as continued cash flow generation. We have also restructured our debt portfolio through the repurchase of the remaining 270 million of subordinated notes and the execution of a new unsecured credit facility. We have replaced the 8 7/8% subordinated notes with floating rate debt under the new 350 million credit facility. As a result we exited 2005 with a net cash position of positive 258 million versus a negative position of 177 million at the beginning of the year. The balance sheet has never been stronger and provides the Company with tremendous flexibility as we look to expand our growth platforms.

For full year 2005 we're forecasting cash EPS which excludes intangible amortization in the range of $1.20 to $1.25. The estimated impact of intangible amortization is forecasted to be $0.14 per share for the full year of 2006. Forecasted GAAP EPS for 2005 is $1.06 to $1.11 per share. This would represent an increase over 2005 in excess of 25% using cash EPS or over 30% using GAAP EPS. For 2006 we are forecasting organic growth of 5 to 7%. These 2006 revenue growth estimates ignore any impact of foreign exchange.

We are forecasting 2006 operating margin expansion of 75 to 100 basis points over 2005 levels which would be from both gross margin expansion and controlling selling general and administrative expenses partially offset by higher R&D spending. Given our significant delevering we expect interest and other expense to go to 5 million for 2006 and our forecasted tax rate for 2006 is 24.5%. Free cash flow for 2006 is forecasted to be greater than GAAP net income as we increase our capital expenditures in our growth platforms. In the first quarter this year we are forecasting EPS, excluding intangibles, of between $0.21 and $0.23 with the estimated impact of intangibles of $0.04 per share. GAAP EPS is forecasted to be in the range of $0.15 and $0.19.

I will now stop and open the call to your questions.

[OPERATOR INSTRUCTIONS] Our first question comes from the line of Darryl Pardi of Merrill Lynch. Please proceed.

Good evening.

Hi, Darryl.

When you walk through the segment results do you -- and within LAS both environmental and biopharma you talked about the things, the product lines that were good, but can you walk through the whole portfolio and help us understand what led to the decline in biopharma and the slow down in environmental?

I'm going to ask Rob to answer that question in his new role here.

Hi, Darryl. This is Rob. How are you doing?

Hi, doing well, thanks Rob.

So, maybe we can talk about biopharma a little bit, and I would say fourth quarter is similar to what we've seen through most of 2005 and as you know, our business, it is basically made up of you could argue four components. It is a drug discovery piece, it's a piece in proteomics, it's the liquid handling piece and it's the piece that services the QAQC or the bioanalytical solutions. Fundamentally, in three of those four appl -- those business, we're seeing a migration of applications. In drug discovery it is really moving from biochemical and radioactive assays to cellular and nonradioactive. In proteomics we're seeing a move from analytical and [tuti]gels where we're looking at the structure of the protein and really biomarkers and trying to determine the pathological outcome. Liquid handling is really a move from where we were focused on sort of high through put large instruments to really more flexible and bench top.

Really the challenge for us has been to sort of migrate our products and our portfolio to match this migration of the application. So it has been a challenge to do that sort of quicker than the the deterioration in the market and I would say in '05 we've got good things that came out late in the year that sets us up nicely for '06, but we just didn't see a lot of traction at the end of the year. So, for example in drug discovery you have probably seen the CellLux and LumiLux coming out that is sort of a both cellular kinetic and end point assays, so that's our first offering that gives us a presence in the cellular. And then of course our BioEXPRESSION platform puts us with a nice offering into the biomarkers and of course just last week we introduced JANUS family of liquid handling which I think puts us in a nice position in this flexible bench top with two independent interchangeable heads.

I think fundamentally if you look at '05, that's what happened. It was an application migration that we've been fighting all through '05, but I think we're positioned here in '06 with some of the new products to hopefully show a little higher revenue growth. I think turning to environmental and chemical actually I think if you look at the year it was a pretty good year. It was up sort of mid-single digits. I think just sort of at the end and I think this is one of the issues with a capital based business, there will be instruments that within a week or two can move in or out, and I just think in the fourth quarter we saw some movement of instruments from a timing perspective, but I think that business continues to look strong and I think the orders were fine toward the fourth quarter and we continue to be excited about the growth prospects for '06.

And have you seen any improvement in their order activity in Europe?

Yes, I think Europe has generally been okay for us as you've seen in other quarters. We generally have not seen as sharp a drop as some of the other competitors. I think part of that is our product mix obviously genetic screening I think does well in Europe, but I would say generally we do okay in Europe. We have not, I would say, all year seen as much a drop as some of our other peers.

I would say 2006 is off to a pretty good start in Europe.

Okay. You have seen some improvement in the order trends in Europe?

I think so.

Okay. And just lastly, Rob, is this a permanent role for you?

Yes.

Okay. Congratulations.

Thank you.

Thank you very much, sir. Ladies and gentlemen the next question comes from the line of Paul Knight of Thomas Weisel Partners. Please proceed.

Hi, Paul.

This is Peter Lawson in for Paul Knight. Just wanted to know what was driving the revenue in Asia.

I think the Asian revenue for us is principally coming out of the China and India regions, so I would say it has been in a number of areas in China and India I would say our environmental business particularly does well there, but with the exception of some areas in Optoelectronics because of the shift between analog and digital that the Asian markets in India and China have been very strong for us. India, China and to a lesser extent southeast Asia.

I would just say from a business perspective it is fairly broad based, both LAS and Opto, so a nice growth in Asia during Q4. I wouldn't tie it to any one business. As Greg said clearly a lot of the growth is coming from the developing areas in China and India.

What was the currency effect in fourth quarter?

It was about 3 points.

Okay. I will jump back into the queue. Thank you so much.

[OPERATOR INSTRUCTIONS] We do have a question from the line of Scott Scher of Clovis Capital. Please proceed. Mr. Scher, your line is open.

I am sorry, I had mute on. Sorry about that. Could you talk about your thoughts with regards to stock buy back and what --- in your assumption for earnings, EPS for the year what share count you assumed?

We ended up buying back about 1 million shares in the fourth quarter. We've been authorized by the board to buy back up to 10 million shares and made a decision as a management team to at least buy back the dilutive impact of new shares coming into our share count within a year so we had targeted that number to be about 2.5 million shares for 2005 of which we bought back 1.1 million. So, we carry forward to 2006 kind of a held over buying amount of 1.4 million, and so if you add that to the roughly 2.5 million shares we expect to come into the share count for 2006 we would expect we'd probably buy back 3.5 to 4 million shares, so we expect the share count to decline by about 1 million shares off of where and end the fourth quarter.

One thing to note, however, our share count on the face of our press release is abnormally low at 129.6 million, as a result of the fact that we had a small loss from continuing operations. What happens when that occurs is you exclude the usually dilutive impact of common stock equivalents. Since you have a loss they're antidilutive therefore you really want to start with about $131.5 million share count as you begin the first quarter of '06 and probably strip a million off that and we'll hold it flat for the year.

So you're not assuming that you finish the 10 million shares throughout the year?

No, we're not.

Okay.

Thank you very much. Ladies and gentlemen, your next question comes from the line of Derrick Vruiin of UBS. Please proceed.

Hello.

There we go.

Hi. This is at actually Alice Hui for Derrick. I have a quick question. The product line you divested within this quarter within the Optoelectronics division, how big was that business?

That business in 2005 did approximately $3 million in revenue.

Okay. And what is your tax rate on guidance for 2006?

24.5%.

Okay. Thank you.

You're welcome.

Thank you very much. Next question comes from the line of Jason Weiss of Robert Baird. Please proceed.

Thank you for taking my call. My question is with respect to your plans for investment in the coming year and if you can share any ideas about what areas you would like to go after and also if you have a feel for if you're looking more for partnerships or acquisitions?

This is Greg. I think our investment priorities follow, I would say, the overall growth prospects of our different businesses, and are -- from an investment standpoint we're doing a fair amount of internal investments, our capital expenditures are up in 2006. Our R&D spending will be up in 2006. We're looking at selective acquisition. I would say principally around technology additions to the product lines. We think have the best growth prospect, so if you think about our discussion today, you go down that list. Of priorities. We're starting with genetic screening.

Over and above that, we would look at potential acquisitions that help us consolidate an application if we think there are significant synergies around it, but that is a secondary priority to us investing to accelerate the top line growth and really to build the scale of our growth platforms.

Jason, this is Rob. Following up on your other question, I think we will continue to look at licensing as well. Greg mentioned a couple that we did in the fourth quarter obviously Luminex was an important one to give us access to the multi-plexing technology and I think we'll continue to do do this analysis of whether licensing is appropriate. We don't view we have to own all the technology; I think in a number of instances particularly in some of these emerging areas it may make sense to license.

Great. If I could just ask one follow up to that, is it fair to characterize your investment plans as focusing on the LAS more than the Optoelectronics?

We characterize by the end markets of photonics and health sciences, so I would say health sciences is a greater priority for us, certainly from an external spending perspective. Within the photonics markets, we have some attractive growth prospects particularly in the consumer electronics area, both the video projection and the camera phones, that are receiving a fair amount of internal investment, but I would say from an external, certainly acquisition standpoint, it is more heavily weighted, it is heavily weighted on the health sciences.

Terrific. Thank you very much.

You're welcome.

Thank you very much sir. [OPERATOR INSTRUCTIONS] At this time we have no further questions.

Great. Thank you for your questions and your interest. We had an excellent 2005 and are optimistic about our prospects in 2006. We entered 2006 with strong balance sheet, strong organization and a clear focus on our growth platforms. We continue to evaluate opportunities of strengthen and accelerate the growth of the portfolio and we believe our strategy of focusing on execution while increasing our investments in our growth platforms will deliver significant shareholder value. Thanks for your time today and your interest in PerkinElmer. This call is adjourned. Thank you.

Thank you very much, sir. Thank you, ladies and gentlemen for your participation in tonight's conference call. This concludes the presentation and you may now disconnect. Have a good day.