Revvity Inc (RVTY) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2011 PerkinElmer earnings conference call. My name is Jeremy, and I will be your Operator for today. At this time all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) I would now like to turn the conference over to your host for today -- Mr. Dave Francisco, Vice President of Investor Relations. Please proceed, sir.

Thank you. Good afternoon, and welcome to the PerkinElmer fourth-quarter 2011 earnings conference call. If you have not received a copy of our earnings press release, you may get one from the Investor section of our website at PerkinElmer.com, or from our toll-free investor hotline at 1-877-PKI-NYSE. Please note this call is being webcast live. It will be archived on our website until February 16, 2012. Before we begin, we need to remind everyone of our Safe Harbor statement that we have 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 statements 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 the 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 with GAAP in that attachment, we will provide reconciliations promptly. I am 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. We are pleased to report another great quarter for PerkinElmer, rounding out a very good year for the Company, and a year in which we made significant progress across a number of parameters. Given that Andy will discuss our financial results and key market segments in more detail, I will provide high-level financial highlights and focus more on our strategic progress, as well as discuss our outlook and guidance going forward. Turning first to our fourth-quarter financial performance -- PerkinElmer delivered strong growth in revenue, adjusted earnings per share, and cash flow. Revenue grew 15%, and organic revenue grew 6% in the period. Adjusted operating margins increased approximately 250 basis points, and operating cash flow was $82.5 million -- up 95% over Q4 last year.

Adjusted earnings per share were $0.62 in the fourth quarter, up 38% from the fourth quarter of last year, and significantly better than our guidance of $0.49 to $0.51. This much stronger performance was attributable to three fundamental reasons -- first, our revenue growth was stronger than we forecasted, largely due to higher growth in Europe than we had expected, with particular strength from Eastern Europe; second, a more favorable mix and improved operating execution resulted in excellent conversion of our incremental revenue; and finally, the profitability of Caliper during the stub period was better than expected. While stub periods are sometimes difficult to forecast, Caliper's performance benefited from the timing of the closing, as their expenses in the quarter were fairly linear, but the revenue was skewed towards the end of the quarter. The higher-than-planned profit from Caliper contributed about one-third of the approximate 250-basis-point margin improvement for the Company, with the remainder coming from solid revenue growth, favorable mix, and improved operating execution, offset somewhat by the stronger US dollar.

Turning to the full year -- revenue grew 13%, and organically, revenue grew 6% -- at the high end of our original guidance, with solid contributions from all territories. We expanded adjusted operating margins by 150 basis points to 15.4%, well in excess of our stated objectives. Our progress in 2011 gives us even greater confidence in our ability to meet our objective of 18% adjusted operating margins in 2014. This improved profitability translated into adjusted earnings per share growth for 2011 of 35%. Lastly, adjusted operating cash flow grew 24%. During 2011, we also made significant progress improving the growth profile of the Company, through the introduction of several market-driven, innovative new products and a number of acquisitions that expanded our capabilities and considerably increased our addressable markets.

In particular, we significantly strengthened our capabilities in molecular analysis imaging, sample preparation, and informatics. And combined with our historical strength, we now believe we have put together a portfolio of highly differentiated offerings to serve the diagnostic, research, and environmental markets. While it is still early, we are extremely pleased with how the acquisition integrations are proceeding, and our strong results in the back half of 2011 are partially due to our recent acquisitions exceeding our expectations during last year. Also in 2011, we continued to make a real difference for the lives of millions of people across the globe. To highlight a couple examples, through our digital imaging technology, we touched over 1 million people through cancer screening and radiotherapy. Over 2 million scientists worldwide used our electronic notebook and software to improve their research efforts. Through our analytical instruments, over 1.5 billion environmental samples were analyzed, helping to improve the quality of air, water, and food for millions. And we screened over 31 million newborns last year, resulting in 50 babies a day being saved from severe medical complications.

As we look ahead, I am excited about our ability to leverage our global footprint, strong customer relationships, and full spectrum of technologies, to continue to help improve the quality of life across the globe, from early detection of disease to ensuring cleaner drinking water and safer food. Turning now to 2012 guidance, we remain cautious with regard to the overall macroeconomic environment, and have therefore assumed growth in our end market remains similar to what we saw during the last half of 2011. Accordingly, we expect full-year revenue to grow 10% to 12%, and organic revenue growth to be in the mid-single-digit range.

We continue to believe we can expand adjusted operating margins in the 75- to 100-basis-point range this year, despite expanding operating margins of 150 basis points in 2011. Given these factors, we estimate our full-year adjusted per share -- earnings per share for 2012 to be in the range of $1.98 to $2.04, representing growth of 9% to 11% over the prior period. Assuming we achieve the midpoint of our ranges that we have suggested, since the end of 2009, our adjusted revenue will have increased approximately 40% over the three-year period, and adjusted EPS will have increased 85%. I would now like to turn the call over to Andy.

Thanks, Rob. Good afternoon, everyone. I will now provide some additional details on our fourth-quarter results; and following my prepared remarks, we will open it up for questions. As Rob just discussed, we were very pleased to deliver another strong quarter of growth in revenue, adjusted earnings per share, and cash flow, finishing off a great year for PerkinElmer. Revenue for the fourth quarter increased by 15%, and organic revenue increased by 6%, as compared to the same period last year. By segment, organic revenue increased by 5% and 7% in our Human Health and Environmental Health segments, respectively. By geography, organic revenue in the Americas was flat, while Asia and Europe grew at double-digit rate, with Eastern Europe showing particular strength in the quarter.

Within the emerging markets, which represented approximately 27% of total revenue in the quarter, we experienced continued strong demand, posting organic revenue growth of over 20% in these regions. From and end-market perspective, PerkinElmer's Human Health segment represented approximately 48% of total revenue in the quarter. Within Human Health, we serve two end markets -- diagnostics, which represented 26% of total revenue; and research, which represented 22% of total revenue. Organic revenue from our Diagnostics business increased at a low double-digit rate in the fourth quarter, with strong growth generated from both our screening and medical imaging businesses. Our Screening business benefited from solid demand across all major areas of the portfolio, despite cycling up against significant instrument placements from the prior year and ongoing pressure from relatively low birth rates in the US.

In addition, we continue to gain traction in emerging markets, as we further penetrate these fast-growing, highly populated regions of the world with our market-leading screening solutions. In our Medical Imaging business, we saw healthy demand across all key platforms, with solid growth from our base medical diagnostics offering, as well as strong contributions from non-medical applications, incorporating our amorphous silicon detectors, and from surgical applications utilizing our CMOS imaging technology. Organic revenue in our Research business declined modestly in the fourth quarter. Within our base research business, we saw a continued demand for our in vitro imaging systems, particularly our Opera high-content screening system, utilized for greater understanding of biological functions through the study of cellular dynamics. Moreover, we experienced strong growth in our radiometric detection equipment, in support of identification and remediation efforts related to the ongoing nuclear issues in Japan.

With regard to Caliper, we saw broad-based demand across the portfolio, experiencing strong interest in the recently launched spectrum CT for simultaneous in vivo imaging of multiple animal models, providing critical insights into complex living biological systems. We also saw strong growth from our lab [ship] GX and GX2 microfluidic systems, as our customers remain acutely focused on fast, high-quality results in genomic and biologic research. Let's now turn to Environmental Health, which represented 52% of our total revenue in the fourth quarter. Within Environmental Health, we serve three end markets -- Laboratory Services, which represented 24% of total revenue; Environmental and Safety, which represented 19% of total revenue; and Industrial, which represented 9% of total revenue.

During the quarter, we saw double-digit organic growth within both Environmental and Safety and Industrial, and low-single-digit organic growth in our Lab Services business, as we cycled up against a significant contract win from last year. During the quarter, we experienced strong organic revenue growth from all of our major product areas in Human Health. The broad-based demand illustrates the breadth and depth of our product offering and our extensive application knowledge, as we help address our customers' need for a wide range of detection capabilities for trace metal and organic content. Before going any further, I want to provide some additional color on the two non-cash charges we highlighted in our release. These charges had an unfavorable impact on our GAAP results in the quarter, but we believe will benefit the Company in the long run. First, we changed our methodology of accounting for our defined pension plans. This change is particularly relevant to PerkinElmer, as these plans are primarily related to businesses we no longer own; and only approximately 10% of the beneficiaries within these plans are active in our current operations.

In addition, the mark-to-market method of accounting for a defined benefit plan is the preferred method under Generally Accepted Accounting Principles, as it provides greater clarity of business performance and improves the comparability of financial results by clearly segregating the financial implications of defined benefit plans. This change has no economic implications, and there is no impact on cash flow or pension funding requirement, or to PerkinElmer's future liabilities associated with these plans. I will provide additional details on the impact to our financial results shortly; but I want to highlight that as a convenience to our analysts and investors, we have placed in the Investor section of our website a presentation which includes further information on this change, as well as a summary of our historical results reflecting this change. This analysis includes GAAP results, as well as a reconciliation to our non-GAAP results.

Secondly, during the quarter, we recorded an incremental tax provision for the repatriation of $350 million of earnings from international operations, which will enable us to utilize these funds to pay down our increased debt resulting from the acquisition of Caliper. This one-time charge of $80 million represents a 23% effective tax rate on the repatriation. The utilization of tax attributes attained with the acquisition of Caliper will result in virtually no cash taxes on this repatriation; but under GAAP, we were required to record a non-tax charge in the P&L, because the tax benefits from the Caliper tax activity are recorded on the balance sheet. The long-term benefits of accelerating debt reduction will benefit us with more flexibility to resume strategic capital deployment, thereby continuing to increase our growth profile.

Now, looking at our margin performance in the period, adjusted gross margin expanded approximately 300 basis points, driven by volume leverage, strong productivity gains resulting from our margin-expansion initiatives, and the favorable impact of acquisitions. Adjusted operating margins expanded approximately 250 basis points in the fourth quarter to 18.5%, due primarily to these same factors. For the full year 2011, adjusted operating margins expanded approximately 150 basis points to 15.4%, as compared to the same period a year ago -- well ahead of our stated objective of adjusted operating margin expansion of between 75 to 100 basis points. With further productivity investments planned in 2012, we firmly believe in our ability to achieve our stated goal of high teens operating margins by 2014.

In our Human Health segment, adjusted operating margins for the quarter were 22.8%, representing an increase of approximately 350 basis points as compared to the fourth quarter of 2010, while our Environmental Health segment delivered adjusted operating margins of 18.8%, representing an increase of approximately 320 basis points. Volume leverage, favorable mix, and productivity gains across the Company, combined with solid contributions from our Caliper and Informatics businesses, drove these strong segment performances. GAAP operating loss was $27.3 million in the fourth quarter of 2011, versus operating income of $48.8 million in the fourth quarter of 2010. As mentioned previously, the fourth quarter of 2011 includes a non-cash, pretax charge of approximately $69 million in the period, resulting from the change in accounting methodology for our defined-benefit plans. To reiterate, this change has no impact on our cash flows or funding obligations.

For the fourth quarter, our GAAP tax rate included a non-cash charge of approximately $68.3 million, related to the previously mentioned plans to repatriate foreign earnings to accelerate both our delevering strategy, as well as the utilization of the net operating loss carryforwards obtained with the acquisition of Caliper, partially offset by other discrete items. On a non-GAAP basis, our adjusted tax rate was 24.5%, which is slightly favorable to the guidance communicated in November. GAAP loss per share from continuing operations in the fourth quarter of 2011 was $0.75, compared to earnings per share of $0.37 in the fourth quarter of 2010. Our adjusted EPS was $0.62 in the fourth quarter of 2011, up 38% from the prior year and exceeding our guidance for the quarter of $0.49 to $0.51.

For the full year, adjusted EPS was $1.83, as compared to $1.36 in 2010, representing an increase of 35% year over year. Our weighted average basic share count for the fourth quarter of 2011 was approximately 112.7 million shares, and our ending share count was approximately 112.8 million shares. Turning to the balance sheet, we finished the fourth quarter with approximately $945 million of debt and approximately $142 million of cash. Looking at our cash flow performance for the quarter -- operating cash flow from continuing operations was $82.5 million, as compared to $42.4 million in the fourth quarter of 2010, representing an increase of 95% year-over-year. For the full year, operating cash flow from continuing operations was $234 million, as compared to $163.1 million, which included a $30 million voluntary pension contribution in the prior year.

Full-year adjusted operating cash flow was up 24% year over year. In summary, we are extremely pleased with our financial performance for the fourth quarter -- 15% reported revenue growth, 6% organic growth, 38% growth in adjusted earnings per share, 95% growth in operating cash flow, and approximately 250 basis points of operating margin expansion are the result of the dedication and hard work of PerkinElmer's 7,000 employees around the world successfully executing on our growth and productivity initiatives. This performance gives us even greater confidence in our ability to achieve our longer-term objectives.

Now, I would like to discuss our 2012 guidance in a bit more detail. We expect full-year 2012 reported growth of 10% to 12%, and organic revenue to be in the mid-single digits or approximately 4% to 6%. In the first quarter, we expect adjusted revenue to be in the range of $500 million to $510 million, with organic revenue growing at the low end of the mid-single-digit range, given the difficult double-digit growth comparison from the prior year. We expect an impact from foreign exchange in the first quarter similar to that of the full year, or a headwind of approximately 200 basis points. Regarding adjusted operating margins, with leverage on the expected revenue growth, as well as continued progress on our multiyear productivity initiatives, we expect to continue to expand adjusted operating margins in the range of 75 to 100 basis points for the year.

Bringing all these factors together, we estimate our full-year adjusted earnings per share for 2012 to be in the range of $1.98 to $2.04, representing growth of 8% to 12% over the prior year. Additionally, taking into consideration the items just discussed, we expect adjusted earnings per share for the first quarter to be in the range of $0.39 to $0.41, representing growth of 11% to 17%, as compared to the first quarter of 2011. This concludes our prepared remarks. I will now turn the call back over to Dave.

Thanks, Andy. Operator, at this time, we would like to open up the call for some questions, please.

(Operator Instructions) Jon Groberg, Macquarie Capital.

Congratulations on the -- looks like a good start to the Caliper integration. Obviously, a lot of adjustments there. We will have to go to your investor website and get all the details. But I just have two questions -- first, Rob, if you think about geographically, most companies have been talking about more strength in the US, and kind of weaker in Europe. And as you said, you had, in the quarter, the exact opposite. So, maybe you can just talk about what you are seeing geographically, and how you think that plays out in 2012. And then, the second question is on the Environmental Health operating margin, where, obviously, there you did not have a benefit from Caliper, but you still had pretty significant expansion, which is a big reversal from last quarter. Maybe you can just detail that a little bit more. Thanks.

So, I would say on the geographic side -- and I think we mentioned this briefly, is the reason why we saw strength in Europe was largely Eastern Europe. And particularly in the diagnostic area, we saw some real strength in Russia, where we had won a tender where they were looking at both newborn screening and prenatal screening. So, that was really one of the big drivers to the double-digit growth in Europe. I think in the US, one of the reasons why, for us, US was a little weaker was because of strong comps. In Q4 of 2010, we had very strong growth in the US. So, I think those are the explanations for maybe why we are a little off, and maybe with some of the other companies are talking to. And with regard to the Environmental margin expansion, we have been seeing good operating margin expansion in the environmental area. And I think what we saw in Q4 was particularly strong mix; and you are seeing some of the benefit now of the Informatic acquisitions, as they start to ramp up. Of course, we talked about this at the time of the acquisitions. They carry, obviously, much higher gross margins and much higher operating margins. So, we saw those benefits manifest themselves in Q4.

Okay, thanks. And then, just on 2012, are there any other tenders? Or how do you think geographically things will play out in 2012?

As I think about 2012, I expect the US and Europe to be comparable, particularly when we talk about Europe, as Eastern and Western Europe. And I think they are going to be in the low single digits. And I continue to see the majority of our growth, from a growth-rate perspective, coming in the APAC region. So, like I said, US and Europe probably the low single digits. I think probably the APAC is high single, low double.

Great, thanks a lot.

Dan Leonard, Leerink Swann & Company.

On your EBITDA margin expansion plans for 2012, you mentioned that assuming some leverage on incremental revenue as well as productivity initiatives. How much of the expansion would you throw in each bucket? And I'm trying to think of how sensitive that expansion would be to your revenue line.

So, I would say probably 60% is revenue and 40% is from the productivity.

Okay.

And that assumes the mid-single growth that we have guided to.

Okay. And on the productivity initiatives, are those primarily targeted on the gross margin line? On the OpEx? Or any color?

They are actually a little bit of both. We are doing some things from a G&A perspective. I think we have talked on a couple calls about how we want to continue to drive back office consolidation. And then, the other area -- you may have seen, we made some announcements a couple weeks ago with regard to moving some of our manufacturing into Asia. And obviously, those benefits will flow through the gross margin side.

Okay. And then, my final question on CambridgeSoft, on the software side. If there is anything to pick at in this quarter, I actually thought the number for that business would have been higher. I thought it was very Q4-loaded. Looking forward, do you still expect that business to be back-end loaded or seasonal? Or would you expect it to normalize and smooth out under your ownership, as opposed to -- ?

I think it will smooth out to some extent, but it takes us a little while. As you know well, in the software business, the revenue recognition is sometimes difficult to predict. And so, if we look at the Informatics business in the back half, it probably grew mid- to high-single digits. But our expectation for 2012 is more in the mid-teens. And I think as it becomes -- as we own it longer, we will be able to increasingly smooth out the flow of that revenue. So, I expect 2012 will be more linear than '11, and '13 will be more linear than '12.

Okay, thank you.

Ross Muken, Deutsche Bank.

So, in terms of Caliper, since you have owned it, how would you characterize happy surprises, parts that you feel like you need to work on, how you feel like you are going to take some of the R&D expertise there and reinvigorate maybe parts of the research franchise, and turn around that business that has been growing below market for a while?

So, I would say, first of all, that probably the most important surprise from my perspective is the quality of the people and the leadership. And I think we had some sense of that during the discussions; but as we get more and more involved with the individuals at Caliper, it is really a terrific group of individuals, both with good technical domain experience, but also a terrific attitude, and really very culturally synergistic with what we are trying to do. We are doing to improve health across the globe. So, I would say that has been probably the biggest surprise. And I would say the other thing is, we get to better understand our technology. We also see increasing opportunities across all PerkinElmer. So, while we, I would say, report this business within the Research segment, we are fairly optimistic that some of the, for example, microfluidic capability is going to be able to be deployed on the food pathogen area, as well as in the diagnostic side. So, I would spike out those two as big surprises from a positive perspective.

And Andy, just from a capital deployment perspective, is debt paydown going to be the focus, still, in the interim? Or with the repatriation, does that solve some of it? And if not, where is the M&A focus going to be?

I think we will still be active in the diligence side of M&A, but I think at least over the next several months, we are going to focus on delevering. I think we were able to put more cash into the deals, so we actually started at a better place. We still expect by the end of this year to have really gotten back to where we started prior to the Caliper acquisition. So, I would say we may be a little slower the first half than the second half, but I think at some point we will be active again on the M&A side.

Yes, Ross, I would say the other thing is, I think the reason for the pause is not only financial in nature, right? We have a couple significant integrations in front of us. And so, with the Informatics businesses and of course the Caliper integration, I think we want to make sure we focus on those. And so, I think both for financial reasons and for Management bandwidth reasons, I don't expect to see anything significant in the first half of '12.

Great. And congrats, guys, on a great quarter.

Thank you.

Quintin Lai, Robert W. Baird.

I would also like to offer our congratulations. Nice quarter, gentlemen.

Thank you.

So, first with respect to the outlook for 2012, mid-single digit. But looking at your two segments, Environmental and Human Health, should we assume that Human Health, then, with a more cautious outlook, to be lower growth and Environmental Health to be higher?

No, actually, I think as we look forward to 2012, we think we are going to see much more consistent growth from both segments. As Andy mentioned, we were pleased in Q4 to see that it was 5% and 7%. I actually think for 2012, you could see a scenario where we continue to see fairly similar growth across the Human and the Environmental Health. And of course, one of the reasons for that is we continue to feel good about the prospects for Caliper to improve the growth profile of the Human Health side.

And then, Rob, over the -- it seems like the last few weeks, we have seen a lot of news with respect to maybe a diagnostic company going hostile against one of the [tool space], we see tools companies increase their diagnostics management or do acquisitions. Could you give us a little update on how you feel about your diagnostics platform? And what do you think you need to do to continue to grow that over the next, let's say, three to five years?

So, I would start off by saying -- look, we feel terrific about our diagnostic platform. I would say the way to think our diagnostic platform is, it is a little different, though, in the developed markets as it is in the emerging markets. I would say in the developed markets, it is fairly specialized around newborn and prenatal, and maybe some molecular diagnostic tests -- again, particularly in those applications. I think when you get in the emerging markets, it is much broader from the standpoint of -- we have a terrific channel with the SYM-BIO acquisition. And of course, we picked up through that acquisition assays and capabilities into infectious disease in places like HIV and a hepatitis C. So, I think you have to look at it is -- in the emerging markets, a much broader diagnostic play; whereas I think in the developed markets, it is fairly specialized.

Do you think that over the time periods, do you feel like that you have what you need to continue to grow? Or will you be looking to be opportunistic with, let's say, M&A?

I think we will continue to be opportunistic across all our businesses. But as I alluded to before, the other very interesting aspect of Caliper is, as you know, a lot of our diagnostic tests have been immunoassays and protein-based. And Caliper brings us some very interesting technology around molecular DNA testing. So, we also, down the road, look to deploy some of that into our diagnostic channel. But I think we will continue to look and add assets, as I said, across all of our businesses. And obviously, you mentioned the attractiveness of the diagnostic market. And so, obviously that is an area of significant priority for us.

Thanks.

Nandita Koshal, Barclays Capital.

I was wondering if, to begin with, if you could comment on expectations around the Caliper deal included in the 2012 guidance. Have your view of the revenue and EPS accretion changed at all? What is the contribution from that piece?

No, I don't think anything has changed for '12. I would say that the expectations of '11 are obviously, now that '11 is closed, we are a little bit low. But I still think we still expect $0.08 of accretion, and the top-line growth of around $180 million is still pretty firm.

Okay. And is there a meaningful tax rate advantage linked to the deal? I believe there was a fairly quick advantage that you could see in 2012. How should we be thinking about the tax?

I think that was really the reference to the repatriation of the cash. While Caliper had some tax attributes, the requirement under the acquisition accounting is those tax attributes actually go up to the balance sheet as a deferred tax asset. And you do not get the benefit of that through the P&L. And so, to some extent, by bringing the cash back, we are utilizing those attributes much sooner. So, while we get a significant economic benefit from the tax attributes, we don't get a P&L or earnings benefit.

I see. And again, on the margin expansion front, you are looking for 75 to 100 basis points of margin expansion for the full year. That is including, obviously, the very high margin acquisitions that benefited Q4. How much of that expansion is coming from acquisitions? And why does that number not look more comparable to what we saw in Q4? I know there was a bit of that skewed revenue profile issue, as well. But one would imagine you would be above the usual run rate on margin expansion?

Well, first of all, I would start off by saying -- look, we think when you do 100 basis points, we think that is pretty terrific performance. But I would say one of the things that is depressing that -- is that we are also within that 75 to 100 basis points, continuing to fund productivity moves. So, I mentioned the fact that we are talking about moving some production into low-cost regions. We are also doing some things from a G&A perspective. And so, when you do those types of moves, very often you have repetitive costs. And so, the 75- to 100-basis-point margin expansion is net of funding the continued productivity actions we are taking, so that we can continue in '13 and '14 to achieve the margin expansion and hit our 18% that we stated.

Okay, that is very helpful. And I don't mean to hog time here, so just one very quick last one. What was the source of the trend in Eastern Europe? What end markets, et cetera?

It was largely in the diagnostic area, and specifically in our newborn and prenatal area.

Okay. Thank you, gentlemen.

Jon Wood, Jefferies.

So, what are your expectations for the Medical Imaging business in your guidance for '12?

I think the Medical Imaging business will perform similar to the overall Corporation. So, our expectations are probably mid-single.

Okay. And Rob, when I lump prenatal, neonatal, and core together, that business looks like it is around low single digits in the full year of '11. Does that accelerate in '12? That kind of collective newborn business?

So, I think your assumption on '11 is correct. And I think for 2012, our assumption is it accelerates a little bit; but the real key factor for that business is birth rates. And historically, when you look at a recession, particularly in the US, you will see depressed birth rates for maybe 12, 18 months. We are now going into the third year. So, that is going to be the real determinant for us, is if we continue to see flat to down birth rates, it is going to be tough to grow much beyond mid-single digits. If we get a little help from birth rates, I think you could see some acceleration there. Now clearly, outside the US, and I think in particular the prenatal area, we expect to see much better growth than that. It's just a question of how much the US will be a headwind.

Got it. Is the -- and this is for Andy -- the Caliper NOL shield, you basically exhausted that with the [$350 million], bringing that back, right? Is it totally done at this point, or is there still some kind of fringe benefit there?

No, for the most part, it is done at this point.

Okay. Last one is -- what -- did you give a tax rate guidance for 2012?

We did, we did. But it will be slightly better than our fourth quarter, which was 24.5%. We are estimating it to be 24% for 2012.

All right. (multiple speakers) Thank you very much.

Paul Knight, CLSA.

As you go into the 2012 period, the risk would be budgets are reset by customers and academics, like they have been in past recessions. What is your read on customer attitudes on their R&D plans for 2012?

So, I think we are cautiously optimistic in that regard, Paul. But the only thing I would say is -- and again, we have seen this in the past. Even though people will reset their budgets or cut their spending, we find that they still tend to spend in the areas where they think they are getting good productivity improvements or improved technology capabilities. And so, I feel pretty confident that, and particularly with some of the new products that we have come out with and some of the offerings that Caliper has, that even despite some realignment of budgets, I think we will still find money is allocated to the types of things that we can deliver to the customers.

Where you with the R&D budgets, Rob? Are they going to go up or be unchanged as a percentage of revenue?

They have gone up a little bit in the back half of 2011, and they will continue to go up in 2012. And just to give you a perspective, we are now at a run rate closer to $125 million or $130 million a year, and we entered the year at a run rate of about $100 million a year. So, we have taken it up fairly significantly. Now, to be fair, our revenue has grown, as well. But we have significantly improved the R&D spend at PerkinElmer, and we will continue to do that.

As a percent of revenue going up a bit?

It will go up.

Yes. It was up 20 basis points in Q4, and it will go up in 2012, as well.

Okay. And then, last -- others in the industry have an above 50% goes back to shareholders and dividends and buybacks. Are you guys thinking that way? Or do you have a set number that you would like to be at? Or are you there yet?

So, if you look historically, we have been consistent with that number. When you look at our dividends and share buybacks over the last couple of years, we returned a fair amount to the shareholders. With the Caliper acquisition, of course, the Informatics acquisitions we did earlier in 2011, we put on a fair amount of debt on the balance sheet. So, our intentions, probably for the next couple of quarters, is to use the cash flow we generate to really delever. So, I would not anticipate significant share buybacks until we get the balance sheet back to where it was prior to Caliper. Now, of course, we do pay a dividend every quarter, and we will continue to do that.

Yes, thank you.

Peter Lawson, Mizuho Securities.

Robert, just wondered if you could talk through some of the one-time benefits in Q4. You mentioned the Russian tender. Is there anything else in there? And then, how much did Caliper contribute?

From one-time benefits, I would say, rather, benefit, it was -- in any given quarter, we may have some wins. So, that was just a tender that we won. So, in any given quarter. But I would say, that is probably the one that I would spike out as having the most impact. And the reason why it is fairly visible is because it improved the European growth rate. And I think relative to our expectations, it was much higher. The Caliper contributions in the quarter was about $31 million, so fairly consistent with what we expected. As I said, it grew about mid-teens. And from an operating perspective -- we sort of alluded to this -- but because of the timing of expenses being fairly linear, and because of the revenue being more back-end loaded, I think we had guided to about a $0.01 benefit in the fourth quarter. It was closer to $0.04. So, there was about a $0.03 incremental EPS improvement as a result of the higher income in Caliper. Some of that is due to performance, quite frankly, and some of that due to just the timing of the revenue and expense.

Got you. And then, the weakness in Research -- I can't remember if you talked through that.

Well, I think the Research area continues to have a headwind because of our radiochemical business. And so, if you pull that out, I think the rest of the Research business grew. We saw good growth in our Imaging area, so the Operas continue to do well. And of course, I mentioned Caliper continues to do well. So, there are pockets of growth in the Research area, but just because of the radiochemical being down again in the high-single-digit range, it puts a lot of headwind on that business. And of course, the strategy there or the goal there is to use Caliper's growth to help offset that, and then ultimately return that to a business that can grow mid- to high-single digits.

When do you think that radiochemical business hits a base?

You know, it's hard to predict. One of the things we are looking at is -- what other things can we do with that business? It's a combination of -- it's going to continue to shrink relative to overall markets. But we are looking at maybe other opportunities to find up some applications.

Okay. Thanks so much. Congrats.

Kevin is here, Peter. Maybe Kevin wanted to spend a second, because I know he has been looking at the radiochemical business.

Yes, I think Rob hit it right on, relative to the decline. And I think that we had some really interesting developments back about 1.5 years ago -- a scientist from Millennium actually started using the Ivus imagers from Caliper to do PET scans, which was not what they were initially intended for, but we found great translation to a clinic by using PET scans in the imager. He subsequently went to Amgen and is now creating a lot of energy around using these PET scans. And what is really interesting is that our assets that we have here at PerkinElmer can be utilized to actually make some of these PET reagents.

And so, we are looking at some of our Caliper technologies to further stimulate some of the growth opportunities in some areas that we think have some rather interesting prospects, both at Research and maybe ultimately in the clinic, to offset some of the decline. So, if it's declining at a rate of about 8%, 8% to 10%, if we can get that down to no worse than 5%, I think it's going to have a great material benefit to our overall P&L, because it is a very profitable part of the revenue stream.

Dan Arias, UBS.

Rob, in the pharma business, did the difference in growth between the developing the developed world close at all in 4Q? Or did that basically look like it did in 3Q? And so, what is your view on 2012, with that dynamic in mind?

I would say it closed a little bit. But I think we continue to see that is probably the opportunity for us in the 2012 area, is to continue to make penetration in the APAC region. I would say our expectations are not significant -- or in our 2012 guidance, we have not assumed that we are going to make a significant amount of progress there. But I think that maybe presents a potential opportunity and upside for us.

Okay.

Go ahead, Kevin.

I was just going to add one comment to that -- and that is that Caliper, we never really had a very good footprint in Asia. And so, their technologies have a lot of potential there. And I think one of the really interesting and compelling reasons for the merger is to in fact get this footprint in Asia established for Caliper. And I think we have a meeting going on, actually this week. It has really been a productive meeting with our sales organizations, and I think that merger is going extremely well; there is a lot of motivation and a lot of excitement. And we have actually placed a senior manager to head up that Asia-Pac region, and most of those leaders are with us this week. And I think that we are going to find that there is going to be a nice opportunity to start really tracking the Caliper portion, which will bring an overall balance to the Asia position for the Research markets.

Okay, that is helpful. Thank you. And then, on the OneSource business, can you just give a sense of what the competitive dynamic is like there? What is the key to account wins? And how much of a role does price play, and how sticky do accounts tend to be?

I think the competitive dynamics have always been fairly fierce there, from the standpoint of -- there are a couple of large instrument players who compete on most of the OneSource opportunities. I think the competitive dynamics start with probably -- who has the experience and who has the capabilities to do this? And I think generally, that is why, at least historically, we have done quite well in that. Because I think we were early out of the gate in multivendor service. And so, I think in most of these tenders, we obviously have references and a lot of customers that we can point to.

So, I think that in a lot of cases. I'm not sure if price is that significant, quite frankly; because generally, the discussion with the customer is really around availability and uptime. So, while that ultimately converts to productivity for the customer, it is not necessarily from the standpoint of -- we are doing it cheaper. It's just that because we put engineers on site, we can guarantee two- or four-hour turnaround or uptime, as compared to an OEM that might say 24- or 48-hour turnaround. So, that has really -- it has really improved productivity in the lab, as compared to necessarily cost reduction. The answer to your other question is, we generally -- it seems to be fairly sticky. If you are doing a good job, they have the tendency to keep you around, because it can be fairly high switching costs.

Great. And then, one last one for Andy. I don't know if I missed it, but did you give the currency impact for 4Q? And could you just parse out what you are looking for from FX next year?

Yes, it was about 200 basis points of headwind in the fourth quarter. We think that is going to be pretty much throughout -- flat in the fourth quarter, 200 basis points for the full year 2012. About the same in the first quarter. It won't have a significant impact at the bottom, maybe $0.01 or so, if we see the rates where they are today.

Okay, thanks very much.

Steve Willoughby, Cleveland Research.

I was wondering on the Diagnostic business, if you could break out or give us an idea of how much of that business you consider from developed markets versus emerging, since they obviously have the different growth rates?

Yes, so I would say the emerging markets right now is probably about 20%, and the developed markets right now are about 80%.

Okay. And then, given that you have been going against tough comps in your Service business, do you expect that business to go back into the mid-single digits in 2012?

Yes. Our expectation for Service would be to return to mid-single organic growth.

Okay, thanks very much.

(Operator Instructions) Isaac Ro, Goldman Sachs.

On the mid-single-digit growth outlook you guys outlined for Medical Imaging this year, I just want to square up a couple of things. We obviously have an outlook for new orders from the major imaging companies, is probably flat to negative. So, I just want make sure that it's fair to say that, with that as context, the balance of your business can grow closer to double digits?

Yes. I think clearly, the higher growth is coming from non-medical and the CMOS business, the acquisition we made. But having said that, our Medical business, we still expect to grow slightly.

Okay. And so that is -- and by slightly, I think you said earlier, mid-single. I just want make sure I had that right.

I think mid-single for the total business. I think the way to think about it -- the medical side is probably low-single, and the non-medical and the CMOS is higher, sort of high-single or low-double.

Got it. Okay. And then, in terms of the mixed benefit from -- or the margin benefit from the Caliper integration versus the new assets from the lab software side, just trying to figure out the importance of one versus the other, in terms of driving better operating margins this year.

In the case of Q4, Caliper was very significant -- again, because it was a timing issue. I think if you look at, let's say, the full quarter, then I think Caliper is probably going to be in 2012 neutral to our operating margins. And of course, they are growing into their scale, if you will. So, our expectation is for 2012, the operating performance of Caliper will be maybe equal to or slightly better than the corporate average.

Got it.

So, that the benefit from an acquisition perspective is more on the Informatics standpoint, from a mix point of view.

Got it, okay. And then, lastly, maybe a big-picture question on lab software -- obviously, you guys have a lot of new assets there. And maybe, as we think about developing those products into more combined offerings, what kind of a timeline should we think about before you think you have a more integrated offering for those types of products? And then, in concert with the OneSource business that you have?

We have actually had some pilots that were actually going on right now with a couple select customers. And so, assuming those go well, I think we could have something in the latter part of 2012.

Got it. Okay, thank you much.

At this time, there are no questions queued. I would like to hand it back to Mr. Rob Friel.

Thank you for your questions and continued interest in PerkinElmer. As we enter 2012, we believe we are very well-positioned to drive growth and excellent financial returns through our strength and capabilities, innovative offerings, and continued focus on margin expansion. In addition, I feel extremely great about our ability to continue to make a dramatic impact on human and environmental health, with the ultimate goal of significantly improving life expectancy as well as the quality of life for everyone around the globe. With that, let me thank you again for joining us today, and wish you all a great evening. This call is now adjourned.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.