Thermo Fisher Scientific's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Thermo Fisher Scientific (TMO)

Q1 2012 Earnings Call

April 25, 2012 8:30 am ET


Kenneth J. Apicerno - Vice President of Investor Relations and Treasurer

Marc N. Casper - Chief Executive Officer, President, Director, Member of Strategy & Finance Committee and Member of Science & Technology Committee

Peter M. Wilver - Chief Financial Officer and Senior Vice President


Quintin J. Lai - Robert W. Baird & Co. Incorporated, Research Division

Doug Schenkel - Cowen and Company, LLC, Research Division

Amit Bhalla - Citigroup Inc, Research Division

Travis Steed - Macquarie Research

Peter Lawson - Mizuho Securities USA Inc., Research Division

Jon Davis Wood - Jefferies & Company, Inc., Research Division

Daniel Brennan - Morgan Stanley, Research Division

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

Vamil Divan - Crédit Suisse AG, Research Division

Isaac Ro - Goldman Sachs Group Inc., Research Division

Daniel Arias - UBS Investment Bank, Research Division

Sung Ji Nam - Cantor Fitzgerald & Co., Research Division

Steve Willoughby - Cleveland Research Company

Paul R. Knight - Credit Agricole Securities (USA) Inc., Research Division

Daniel L. Leonard - Leerink Swann LLC, Research Division

David Ferreiro - Oppenheimer & Co. Inc., Research Division

Derek De Vries - BofA Merrill Lynch, Research Division



Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2012 First Quarter Earnings Conference Call. I would like to introduce our moderator for the call, Mr. Kenneth Apicerno, Vice President, Investor Relations. Mr. Apicerno, you may begin the call.

Kenneth J. Apicerno

Good morning, and thank you for joining us. On the call with me today is Marc Casper, our President and Chief Executive Officer; and Pete Wilver, Senior Vice President and Chief Financial Officer.

Please note that this call is being webcast live and will be archived on the Investors section of our website,, under the heading Webcasts and Presentations until May 18, 2012. A copy of the press release of our 2012 first quarter and future expectations is available on our website under the heading Financial Results. So before we begin, let me briefly cover our Safe Harbor statement.

Various remarks that we may make about the company's future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's annual report on Form 10-K for the year ended December 31, 2011, under the caption Risk Factors, which is on file with the Securities and Exchange Commission and available in the Investors section of our website under the heading SEC Filings. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.

Also, during this call, we'll be referring to certain financial measures not prepared in accordance with Generally Accepted Accounting Principles or GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the press release of our first quarter 2012 earnings and future expectations and also in the Investors section of our website under the heading Financial Information. So with that, I'll now turn the call over to Marc.

Marc N. Casper

Thank you, Ken, and good morning, everyone. Thank you for joining our call today. We had an excellent first quarter. It's always nice to report a strong start to the year, and I'm pleased to say that we continued our trend of consistently delivering double-digit growth in adjusted EPS. Our teams executed well. Our growth drivers continue to gain traction, and the cost-reduction programs we put in place delivered according to our plans. All of these added up to quarterly performance that was somewhat better than our expectations. I'll begin this morning's call by covering the financial highlights, giving you a little color on how we performed relative to our key end markets and then getting to a bit more detail on some of our growth drivers, namely product innovation and emerging markets.

As I mentioned, we had strong double-digit adjusted EPS growth with a 27% increase over 2011. We also delivered strong revenue growth with a 14% increase in the quarter. Our adjusted operating income rose 20%, and we increased our adjusted operating margin by 90 basis points. We continued our momentum of strong financial performance into 2012, and that positioned us well to meet our goals for the year overall.

Let me turn to our end markets and give you a high-level overview of what we saw in Q1. First, academic and government. While these markets were down low-single digits in the quarter, they were slightly better than what we saw in the fourth quarter of 2011. We had moderate growth in Laboratory Consumables and Bioscience reagents, which tells us that scientists and researchers continue to do their important work. The capital equipment side of their spend, however, continues to be constrained as our customers are choosing to delay their larger purchases.

Conditions in healthcare and diagnostics were similar to what we've seen over the last several quarters with one exception. This quarter, we experienced weak demand from our seasonal flu and allergy products. As you probably know, it was a light flu season this year, and we also saw the impact of unusually low pollen levels on our seasonal allergy product sold in Japan. Sales of our clinical diagnostic products remain strong, as they have for quite a few quarters now, driven by continued demand for our innovative biomarker tests such as our PCT marker for diagnosing sepsis.

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