Revvity Inc (RVTY) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen and welcome to the PerkinElmer 2010 quarter one earnings conference call. I'll be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session toward the end of this conference. (Operator Instructions).

As a reminder, this conference is being recorded for replay purposes. I'd now like to turn the call over to Mr. Dave Francisco. You may proceed, sir.

Thank you. Good afternoon and welcome to the PerkinElmer first quarter 2010 earnings conference call. I'm Dave Francisco, Vice President of Investor Relations and Treasurer for PerkinElmer. With me on the call are Rob Friel, Chairman and Chief Executive Officer, and Andy Wilson, Senior Vice President and Chief Financial Officer. If you have not received a copy of our earnings press release you may get one from the Investor Relations section of our website at www.PerkinElmer.com, Or from our toll free Investor Hotline at 1-877-PKI-NYSE. Please note this call is being Webcast live and will be archived on our website until May 20, 2010.

Before we begin, we need to remind everyone of the Safe Harbor statements that we outlined in our earnings press release issued earlier this afternoon, and also those in our SEC filings. Any forward-looking statements made today 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 statement as representing our views as of any date after today.

During this call, we will be referring to certain non-GAAP financial measures. A reconciliation of non-GAAP financial measures we plan to use during this call to the most directly comparable GAAP measures is available as an attachment to our earnings press release. To the extent we use non-GAAP financial measures during this call that are not reconciled to GAAP, we will provide reconciliations promptly.

I'm now pleased to introduce the Chairman and Chief Executive Officer of PerkinElmer, Rob Friel.

Thanks, Dave. Good afternoon and thank you for joining us today. Let me begin by saying that we are pleased by our first quarter financial performance. We started the year strong, and believe we are very well positioned strategically in attractive end markets and innovative technologies. Our results on the top line exceeded our expectations, as many of the most challenged markets in the economic downturn returned to growth in the quarter. We are particularly pleased with these results given the difficult comparisons from the first quarter of 2009, including the impact of the extra selling days that we had in the first quarter last year.

Additionally, we were able to significantly expand operating margins and generate strong growth in both adjusted earnings per share and cash flow. Andy will provide more details on the financial performance shortly. I'd now like to share some of our first quarter highlights regarding progress on our key initiatives to increase the growth profile of the Company and expand detection and prevention capabilities to advance human and environmental health.

Starting with human health, we recently announced our intent to acquire Signature Genomics, deepening our commitment to the diagnostics market. Signature brings complementary services to our existing Diagnostics portfolio, with cutting edge cytogenetic technology, providing unmatched accuracy and comprehensiveness of results. In addition to complimenting our current business, Signature provides expansion opportunities in the diagnostic oncology, with an offering that combines multiple key detection elements in a single assay. We launched our new BACs-on-Beads technology, a multiplex diagnostic tool that can detect markers of multiple diseases from a single serum sample to the European market this quarter, with. strong early receptivity resulting in key customer wins in large hospitals and labs.

Additionally, we are piloting a new diagnostic technology program for detecting severe combined immunodeficiency disorder, or SCIDS, a primary deficiency in the immune system that results in the onset of serious infections, even life-threatening ones, within the first few months of life. This pilot project for SCIDS screening provides significant opportunity going forward, as it is expected to be the first addition to the next menu expansion of mandated newborn tests in the US market. In our research business, we have seen continued strength from our reagent portfolio including increased demand for our Alphalyse technology, due primarily to the migration of biologic based drug discovery research. We are finding that preclinical research laboratories are now standardizing their equipment around Alphalyses to aid in the detection of cardiovascular, cancer, diabetes and neurological diseases.

In Environmental Health, we continue to address critical Environmental Food and Consumer Safety concerns with market driven innovation in response to increased global regulatory mandates and the identification of new contaminants. In Asia, governmental regulatory enforcement has driven increased demand for our Environmental and Food Safety monitoring systems, as this region migrates toward Western compliance standards. For instance, in an effort to address food safety concerns in China, we are providing the government authorities with more than 100 atomic absorption spectrometers for toxic metal contamination testing. In addition, we are seeing strong demand trends in other developing regions within southeast Asia, due in part to stricter quality water standards.

In regard to our strategic initiative to expand our mass spec capabilities, I am pleased to report that we have finalized the purchase of the remaining interest of the ICPMS joint venture. Our continued commitment and innovation in this technology will provide our customers with solutions that support the analysis of component elements, trace elements or contaminants in samples of interest, leading to improved products and applications for their end markets. The new Nexion ICPMS system recently launched at PittCon, advances this trace element analysis with three modes of operation within one instrument, creating a highly efficient lab environment.

Additionally, we have partnered with Abbott in the area of pathogen detection through the incorporation of time of flight mass spec technology and Abbott's flex ID pathogen detection system. The flex ID system can rapidly and accurately identify pathogens, as well as alert health officials to new disease strains, help guard against bioterrorism and help hospitals identify antibiotic resistant bacteria in their facilities.

In summary, we're pleased with our strong start to the year financially. As well as the progress made on our growth initiatives towards the advancement of human and Environmental Health. As mentioned, we are encouraged by the improving trends we are seeing in our end markets, as visibility slowly improves throughout our businesses. Given this, we have decided to increase our guidance, reflecting our revised estimates for the full year of mid single digit organic revenue growth, and adjusted earnings per share in the range of $1.43 to $1.48.

I will now turn the call over to Andy to give more details on our Q1 performance, and guidance.

Thanks, Rob and good afternoon, everyone. I'll now provide some additional color on our first quarter results and after my prepared remarks, we'll open up the call for questions. Before moving into the financial details, I'd like to clarify that whenever I talk about a particular measure being up or down, I'm referring to an increase or decrease in that measure during the first quarter of 2010 compared to the first quarter of 2009. As Rob mentioned earlier, we were pleased with our financial performance in the first quarter as we were able to deliver solid revenue, earnings and cash flow growth, over the prior year, particularly considering the impact of the extra selling days we had in the first quarter of 2009.

As discussed last year, the increased number of selling days in the baseline contributed a couple of points of growth in the first quarter of 2009, and this growth had a disproportional impact on our service, reagent and consumable offerings. Revenue for the first quarter increased 7%, as compared to the same period last year. The favorable impact of foreign exchange was 4%. And the favorable impact from acquisitions was 1%. Therefore, organic revenue increased by 2% versus the prior year. The remaining revenue analyses in my prepared remarks will be presented net of the favorable impact of foreign exchange and acquisitions.

By segment, organic revenue increased by 2% and 3% in the Human Health and Environmental Health segments respectively. By geography, organic revenue in the Americas was flat. Europe was up low single digit, and Asia grew at a low double-digit rate. Within the Asian region, organic revenue in China grew in the high teens and we experienced solid low double-digit growth in the emerging territories throughout southeast Asia.

From an end market perspective, PerkinElmer's Human Health segment represented approximately 41% of total revenue in the quarter. Within Human Health, we serve two end markets, Diagnostics which represented 24% of total revenue, and research, which represented 17% of total revenue. Organic revenue for the diagnostics business grew at a mid-single digit rate the first quarter, with our Medical Imaging business returning to positive growth after considerable contraction in 2009. In the first quarter, organic revenue in our research business was flat as this business cycled up against a difficult comparison from the first quarter of 2009, growing low double-digit in the prior year.

We did however see robust demand in our reagent portfolio but this strength was offset by limited capital investment in our high end instrumentation. The Environmental Health business represented 59% of our total revenue in the first quarter. Within Environmental Health, we serve four end markets. Laboratory Services, Environmental, Safety and Security, and Industrial. Our Lab Services business represented approximately 20% of total revenue in the first quarter, and organic revenue grew at a low single digit rate.

OneSource, our customer focused, multi vendor offering maintained strong momentum, driving another solid quarter of organic revenue growth. The Environmental market represented approximately 17% of total revenue in the first quarter, with organic revenue increasing at a mid single digit rate. As Rob mentioned, we saw strong growth in Asia due to increased demand in response to local regulatory requirements, primarily around water quality migrating towards Western compliance standards. Additionally, we experienced continued strong demand for our renewable energy offerings, particularly in the development of photovoltaic cells used in solar panels. This growth was partially offset by continued capital constraints impacting some of our smaller customers.

The Safety and Security market represented approximately 15% of total revenue in the first quarter with organic revenues increasing at a mid single digit rate. We continue to see improving growth opportunities in Food and Consumer Safety Testing, as regulatory requirements around the world become more stringent, and safety concerns extend to food additives and packaging materials. Additionally in the quarter, we saw continued strong demand for our thermal pile sensors in response to the H1N1 virus and lastly, we're beginning to see signs of recovery in our traditional sensor offerings related to fire detection and intrusion alarms as the housing market stabilizes.

Our Industrial markets represented approximately 7% of total revenue in the first quarter and organic revenues increased at a low single digit rate. We are encouraged to see these markets begin to stabilize and return to growth, and we continue to see traction in chemical opportunities as well as materials characterization, primarily related to research on new materials. Turning to our financial performance, adjusted operating margins were up 100 basis points in the quarter, primarily due to successful ongoing cost initiatives and volume leverage. GAAP operating profit was $39.4 million in the first quarter of 2010, versus $25.3 million in the first quarter of 2009. Adjusted operating profit was $55.6 million versus $48 million in the first quarter of 2009.

For the first quarter, we had an effective tax rate of 27.6% on a reported basis versus a previously communicated tax rate of 29%, as we experience add a positive shift in the geographic mix of income. GAAP EPS from Continuing operations in the first quarter of 2010 was $0.22 compared to $0.13 in the first quarter of 2009. Adjusted EPS was $0.31 in the first quarter of 2010, up 19% from the prior year. Regarding our weighted average diluted share count, we had 117.9 million shares outstanding in the quarter, which was up sequentially by approximately 1 million shares due to the issuance under existing stock compensation plans.

Turning to the balance sheet, we finished the first quarter with approximately $347 million of net debt which we defined as short and long-term debt minus cash. This reflects a decrease in adjusted net debt of approximately $66 million, as compared to the prior year. At the end of the quarter, we had approximately $182 million of cash. Looking at our cash flow performance for the quarter, operating cash flow from continuing operations was $52.1 million as compared to $18 million in the first quarter of 2009.

As you may recall in the first quarter of 2009 we reduced the amount drawn under our accounts receivable securitization facility by $10 million, resulting in an unfavorable impact to operating cash flow in the quarter. The remaining year-over-year increase in operating cash flow was primarily attributable to a solid working capital performance as well as the timing of certain tax payments. Working capital turns for the quarter improved slightly year-over-year. In summary, we're pleased with our financial performance for the quarter, driving strong earnings growth and solid cash flow generation and we're encouraged by the trends we're seeing in our served markets.

Let me now discuss our 2010 guidance and provide some further detail. Regarding adjusted earnings per share, we incorporated four key elements into our full year outlook. First, we now anticipate full year revenues to grow organically at a mid single digit rate versus our previously communicated low-to-mid-single digit growth expectation, with the second quarter growing mid to high single digits. Second, given the traction we experienced in our operating margin expansion efforts in the first quarter, we are raising the low end of our forecasted improvement by 25 basis points, and now expect adjusted operating margins to increase by 75 to 100 basis points for the full year.

Third, we expect our effective tax rate to be approximately 200 basis points lower than we had previously communicated, primarily due to more favorable geographic distribution of income. And anticipated beneficial tax legislation. And fourth, offsetting these upsides is a couple of pennies of expected dilution from the acquisition of Signature Genomics.

Bringing all these factors together we now estimate our full year adjusted earnings per share for 2010 to be in the range of $1.43 to $1.48 versus our previously communicated range of $1.35 to $1.42. With adjusted earnings per share for the second quarter expected to be in the range of $0.32 to $0.34. Once again, we are pleased with our financial performance in the quarter. Clearly a solid start to the year, particularly given the strong baseline for the first quarter of 2009. That's the end of my prepared remarks. I'd now like to turn the call back over to Dave.

Thanks, Andy. Operator, at this time we would like to open the call to any questions.

(Operator Instructions). Please limit yourself to one question at a time. You may queue back up for follow-ups. Gentlemen, your first question comes from the line of Ross Muken with Deutsche Bank. Please proceed.

If we look at sort of the Human Health business and obviously you had the tough days comp which probably is more exacerbated in some of those consumable businesses, are we able to sort of tease out kind of that impact to see what the current run rate is for some of the pieces that were probably most hit last year? And also, I guess that probably is true on the service piece.

Yes, Ross, I would say in the Human Health side, we probably would think that those businesses grew sort of mid single digits, if you're thinking about sort of the screening business and the research business. As Andy mentioned, we did see pretty good growth out of the Medical Imaging business. I would say that is less impacted by the days. So I would say that probably didn't have much of a material impact on that business but I think on the screening business and the research business, I would say it's probably 4 or 5 percentage points.

Thanks. And as we look to some of the cyclical businesses, we finally started to see some growth in Environmental as well as in Safety and Security Industrial. If you sort of had to tease out in there kind of late to early cycle type customers, how big were the differentials and sort of ordering patterns and revenue growth?

I think, clearly, the growth's coming from the early cycle customers. I think the late cycle customers are probably going to be back half of 2010 is our sense right now but having said that, it's fairly broad-based across most of the industries that we play into. We're seeing sequential growth in probably every market that we sell into.

And if you sort of -- just quickly to follow up on that characterize your business between early and late in those three segments, what would be sort of the split?

I don't know that I can give you a great split on that other than to say --

Maybe qualitatively.

Probably pretty evenly split, quite frankly.

Thank you very much, Rob.

Thanks, Ross.

Your next question comes from Peter Lawson with Thomas Weisel. Please proceed.

Congratulations on a strong quarter.

Thank you.

Wondering if you could talk about the tone you're seeing from the biopharma customers.

I would say in the biopharma we continue to see good growth on the Reagent side. Some of that is new products, or product offerings, but I think as we talked in the past we continue to see increased use of the Reagents from an experimentation. We continue to see good growth on the service side of the Pharmaceuticals. We saw good growth on One Source continue in Q1. I would say the area where there continues to be a reluctance to spend CapEx and we didn't see much of a change in that in Q1. And as Andy mentioned particularly on the high end instrumentation, was actually down in the quarter for us. So I would say Reagents and service looks good, CapEx continues to be constrained.

And then on the Industrial businesses, which end markets are really starting to fire? Which are the ones that are kind of at their replacement cycle?

For us we saw good growth on the Environmental side. We saw good growth on the food safety side. I would spike those two out as probably the areas of the strongest strength in the quarter.

I'd say we saw sequential improvement pretty much across all of our end markets.

It was pretty broad based but I would say those are the areas where we experienced.

The most.

The most significant improvement.

Okay. Thank you so much.

Thanks, Peter.

Your next question comes from Jon Groberg with Macquarie Capital. Please proceed.

Thanks for taking the questions. So maybe you could just start off on upping a little bit your operating margin expansion targets for the year. Is that mainly just driven by slightly better organic growth or is there anything else maybe you can discuss in terms of raising that?

I think we do see a little bit of leverage out of raising the bottom end of our growth expectation but I think as we talked about over the last couple of quarters, we've implemented or in the process of implementing even more cost initiatives that I think will continue to help us expand margins over the next several years. So I think we did see some good traction in the first quarter, so it gave us a bit of confidence that this was taking hold so we did feel comfortable taking it up from the 50 to 100 to 75 to 100. So I would say it's a little bit of a combination of both.

Andy, just in the first quarter here, you've kind of talked about kind of a multi-year opportunity in the first quarter, what were some of the more significant areas that you made some traction?

Well, I think as we talked before, we are spending a lot of time really looking at areas where PerkinElmer can add value at a corporate level. So we saw some initial benefits out of our logistics. We're starting to see some early opportunities within supply chain. So I think it's still early days, but I think those two were the primary drivers. And so I think we should continue to see those levels of margin expansion going forward.

Okay. And then if I could kind of topic de jour, obviously is Europe, Rob. I think you get about 40% of your sales from Europe. Can you maybe discuss kind of current thinking with respect to if we were the to continue to see a downward spiral in the Euro itself, maybe just kind of what was unique to what you said relative to what most everyone else said was that Europe was actually up and the Americas was flat. That's kind of different from what most of the other peers have been saying. Maybe kind of talk about what you're seeing in Europe.

We saw slight growth in Europe and maybe it's because of a different customer or product mix that we have. And I would say for Q2 we've got similar expectations, maybe even a little bit better than what we saw in Q1. You know, from a currency standpoint, as you know, while it impacts us on the top line, we're fairly well balanced from a distribution of cost and revenue so it shouldn't have a significant impact on the bottom line. It has some, clearly, but not significant, so I would say just have to wait and see. Obviously, the last couple days have been fairly dramatic so we'll just have to see what impact that has on the broader economy.

Your next question comes from the line of Quintin Lai with Robert W. Baird. Please proceed, sir.

Hi, good afternoon. Congratulations on a nice start to the year, guys.

Thank you.

As you look at the raised guidance for the year, Rob, is it going to be contributions from -- is that incremental contribution coming from both segments or do you feel like it's coming from one segment more so than the other.

No, I think it's fairly broad based. I would say it's equally distributed between Environmental and Human Health. Andy also mentioned that our tax rate is going back to where it was in the 2007, 2008 time frame as our geographic distribution sort of goes back to the split we saw during that period of time. I would say it's evenly split both businesses as well as improvement in the tax rate.

Super. With respect to your Diagnostics business, imaging is up, could you provide a little update on how Genetic Screening and cord blood banking went.

Genetic Screening and cord blood were sort of roughly flat, sort of call it low single, sort of flat. And again, I think that's a little distorted because those are two businesses that get dramatically impacted by the less days. I mean, it's really sort of a flow business, if you will. I think the other thing to keep in mind that we did have a pretty good first quarter 2009. So our expectation is when you look at the half, those businesses will be mid to high single digits.

Thank you.

Your next question comes from the line of Jeff Ayres with Leerink Swann. Please proceed, sir.

Hey, guys, thanks for taking the question. I guess just looking at the raised guidance and where we are today and over the last two months, what was kind of your biggest surprise coming out of the fourth quarter call and to now and how has your visibility changed as we progress through the year.

I would say it's three things that Andy mentioned. Clearly the revenue was stronger than we thought and so we're taking our revenue guidance up. I think that was a contributor to it. The second thing was we seem to be getting good traction on some of the productivity actions we've put in place so clearly taking the margin side up as I mentioned before. As we're starting to return to a more normalized income distribution geographically, that was a contributor. So I think all three of those, of which we didn't have great visibility in Q4, and so I would say those are the ones that are really driving our increased confidence and decision to take the guidance up.

I guess put a little differently, focusing more on the revenue guidance and moving it towards the higher end of what it was before, how is the pacing throughout the quarter and is it more the more cyclical industries doing a little bit better as we got through the year?

If you're talking about specifically in the quarter, I think the areas where we were pleasantly surprised was clearly on the Medical Imaging side. Q1 2009 was actually not too bad of a quarter. So we thought we would actually be down in the first quarter of 2010. As I mentioned, that actually grew and then I would say in some of the applied markets we saw a little stronger strength as we went through the quarter and then consequently gives us the confidence to take the revenue guidance up.

Just lastly, real quick, on signature Diagnostics that you guys acquired, have you given any financial information or are you willing to give revenue contributions or expectations outside of $0.02 dilutive.

Just to be clear, we haven't closed on it yet. We announced it's probably going to close in a couple weeks. But I mean, just general financial parameters, I think we did, it's about $20 million in revenue. And it sort of breaks even.

All right. Thanks a lot.

Gentlemen, your next question comes from the line of Derik DeBruin with UBS. Please proceed, sir.

Hi, good afternoon.

Good afternoon.

So you know you had a $0.04 contribution from FX on the top line. What was the bottom line impact? And I guess as the Euro moves around, is there like a rule of thumb we can use for the Company, every 1% move in currency impacts the EPS by X amount?

Well, typically just based on our distribution of our revenue expenses, the impact to EPS has been de minimus.

It was less than $0.01 this quarter, just to give you perspective. Maybe like a $0.005 or something like that. So not significant. It's a little hard, because obviously it depends a little bit on what currencies move, whether it's Euro or yen or et cetera. Generally it hasn't been a dramatic impact either way from a bottom line perspective. Like I said in this case, which was a fairly big move on the top line, call it 4%, it was about $0.005.

Got you. I was looking at the news today. One of your big competitors in the prenatal market is looking at exploring options for that business. I guess can you just talk about what your share is in the prenatal screening business and where you are in terms of developing technologies like noninvasive applications for prenatal screenings.

I'll talk about the first question. I'd rather not want to talk about the second. Other than to say we're doing a lot of work in that area. I would say when you think about 4 million births in the US, we're doing probably about 450,000. Now, of course, not all those necessarily are getting screened for prenatal.

Right.

So I would say you're probably talking about 50 or 60% of births getting some kind of prenatal screening so we've probably got 25, 30% market share.

Okay. And I guess where are we in kind of the marker buildout? Are most states -- have most states gone to a standard set or is there still some states who are still screening three?

When you look at the US, every state right now does at least 20 or greater. And the standard of care is 29. But I would say we're effectively there from the standpoint of states doing the standard of care. That's why I sort of pointed out the SCIDs test because we think that's going to be probably the next addition to the standard of care and maybe we're a year away from this but I think we'll start to see some increases to the standard of care, taking the menu up. If you look at the US right now, all the states are doing at least 20.

And then one follow-up question, actually two questions. I guess has there been any surprises in the services business, just given that we're -- given some of the consolidation that's going on in pharma? From that perspective, are you starting to see your pharma accounts starting to reorder replacement equipment?

So I would say the question, the first question which is are we seeing much change in service, I would say no. We continue to see fairly robust interest in the sort of One Source model where they insource or they outsource the maintenance of the labs. So that continues to go I would say unabated. On the other area, it's a little difficult as you know to sort of characterize all pharma. It varies significantly by customer. I would say we've seen some instances of it, but it's still fairly rare. At least for our products. We're not seeing a significant pickup in CapEx orders from an instrumentation perspective.

Great. Thank you very much.

(Operator Instructions). Your next question comes from the line of Mr. Rob Hawkins with Stifel Nicholas. Please proceed, sir.

Thank you. Can you expand a little bit on the SCIDs launch and give us a sense of timing and magnitude of the launch and kind of -- this is part of a longer term I guess immunoscreening process. Can you go over how you envision that rolling out over the next few years?

Well, actually it's right now in sort of a test phase in one state and we expect that will probably take a couple quarters. Generally, what you'll see is if it gets adopted in one state, it seems to catch on and as I said, our expectation is probably in 2011, we would like to see this added to the standard of care menu. From a revenue potential, if it gets added to a menu, it's probably $20 million to $25 million, just to give you, calibrate from an opportunity perspective.

And as you talk about this as a component of I think you mentioned something like 50 some odd other tests. I mean, is this a quarter, a tenth and is that -- you said 2011, so is that one year and then 2012 is another piece of this? I'm trying to --

As we go out, more tests get layered on, SCIDs is one we talked about. Also the next panel will be around sort of LSDs and so I think as you go out, you'll continue to add on to the panels. And our view is that eventually you'll go from 29 to close to 50.

Okay. And then the European growth demand, is most of that screening and Diagnostics, so, therefore, this spend is less cyclical. And so currency is going to be less of an impact, and then on that area of diagnostics, whether it's European or US, there's been a 2 to 4% drop in birth rates, kind of worldwide. Does that make much of an impact or is it just so much adoption, so much of the adoption curve that still has to happen you don't even see it?

Your first question, the European growth that we saw was sort of broad based. We do have a big screening business in Europe. But our other businesses also saw growth in Europe as well. Your second point is, while we have seen a reduced birth rate in the US, I do not believe we're seeing a reduced birth rate globally. In fact, I think global birth rates are actually up.

Are you, then, on that just one final piece to clarify on that, so is it enough to say bring the division's growth rate down a couple hundred basis points on that type of drop from a magnitude standpoint or is that something you don't really see?

You mean specifically on the birth rate?

Yes.

I don't know that we'd see it. On the margin it might have a minor impact specifically on the newborn screening business, of course that's not a huge piece of the total Company.

Okay.

So I think the fact that birth rates come down if the US, call it a couple points, I don't think you would see it in the PerkinElmer number.

Thanks. I appreciate. I'll jump back in the queue.

Your next question comes from the line of Tony Butler with Barclays Capital. Please proceed.

Thank you. Rob, your comment about imaging was very encouraging, though I'm trying to rectify that with what I understood GE to say, that given the imaging budget plush flush that they saw, they claim that may not last. I'm curious what your outlook may be for diagnostic imaging for the full year but most importantly what kind of visibility do you have? Do you have visibility for the full year or is it just simply on a quarter by quarter basis.

First of all, when GE talks about their imaging business, it includes much more modalities than what we sell into and I think we talked about before. Is that we basically provide them x-ray panels and of course they have numerous other modalities. So it's a little difficult sometimes to triangulate what they say with what we're seeing. The other point I would make is GE is less than 50% of our business now in Medical Imaging, so again, while it has a significant impact, there's a lot of other important customers that are impacting our growth rates as well. But having said that, I would say with the visibility that we have is bookings in place and we can probably look out with pretty good confidence one quarter and I would say increasing confidence in at least six months. And so that's what we're sort of basing it on, but you're right, I mean, it's -- this thing could turn based on what happens with hospital budgets but based on the bookings in place we see now, I think we feel confident that this business will experience positive growth in 2010.

Really helpful. Thank you. And one additional question from a geographic perspective. Some other peers of yours have had really good quarters out of Japan. I don't think I heard Japan being a stellar growth opportunity for you. Am I incorrect? Or --

Japan was an improvement for us relative to 2009, but it's not a huge piece of business for us, but it was positive, I would call it mid single digits.

Thanks. And last question is your sort of long-term guidance, $3 billion, I'm just curious if you speculate a little bit as to what area, be it Human Health, Environmental, quite frankly within Human Health, be it Diagnostics, which area do you think outperforms the most? Could you characterize one particular area over another?

On a long-term basis?

Yes.

Yes, I think -- I mean, hopefully they all outperform.

Sure.

I think Diagnostics probably has a greater opportunity, at least from a macro trend perspective so I would think that's one if I had to pick one I would say probably the Diagnostics area.

Thanks a lot, Rob.

Thank you.

That was our final question. I would like to hand the call back to Mr. Robert Friel, CEO, for closing remarks.

Thank you for your questions. So going forward, we'll continue to focus on three key areas. First, to increase the growth profile of the Company. Second, to continue to invest in new, innovative technologies for better detection and prevention in human Environmental Health. And third to continue to achieve good financial returns through strong cash flow and a focused approach on driving operating margin improvement.

I look forward to updating you on our progress against these priorities during our second quarter earnings call. Thank you for participation in today's call and continued interest in PerkinElmer. Have a great day.

Ladies and gentlemen, thank you for your participation. The conference is now ended. You may now disconnect. Good day.