PerkinElmer, Inc. (PKI)

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PerkinElmer (PKI)

Q4 2012 Earnings Call

January 31, 2013 5:00 pm ET

Executives

Tommy J. Thomas

Robert F. Friel - Chairman, Chief Executive Officer, President and Member of Finance Committee

Frank A. Wilson - Chief Financial Officer and Senior Vice President

Kevin Hrusovsky

Analysts

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

Vijay Kumar - ISI Group Inc., Research Division

Vijay Kumar - Deutsche Bank AG, Research Division

Isaac Ro - Goldman Sachs Group Inc., Research Division

Daniel Brennan - Morgan Stanley, Research Division

Daniel L. Leonard - Leerink Swann LLC, Research Division

Doug Schenkel - Cowen and Company, LLC, Research Division

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

Peter Lawson - Mizuho Securities USA Inc., Research Division

Zarak Khurshid - Wedbush Securities Inc., Research Division

Derik De Bruin - BofA Merrill Lynch, Research Division

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

Daniel Arias - UBS Investment Bank, Research Division

Jonathan P. Groberg - Macquarie Research

Jeffrey T. Elliott - Robert W. Baird & Co. Incorporated, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2012 PerkinElmer Earnings Conference Call. My name is Jeff, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Tommy Thomas, Vice President of Investor Relations. And you have the floor, sir.

Tommy J. Thomas

Thanks, Jeff. Good afternoon, and welcome to PerkinElmer's Fourth Quarter 2012 Earnings Conference Call. 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 Investors section of our website at www.perkinelmer.com. Please note that this call is being webcast live and will be archived on our website until February 14, 2013.

Before we begin, we need to remind everyone of the Safe Harbor statements 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 to GAAP in that attachment, we will provide reconciliations promptly.

I am now pleased to introduce the Chairman and Chief Executive of PerkinElmer, Rob Friel. Rob?

Robert F. Friel

Thanks, Tommy. Good afternoon, and thank you for joining us today. We're pleased to report another great quarter for PerkinElmer, rounding out an excellent year for the company, in which we delivered strong financial performance while continuing to invest in improving our growth and profitability profile.

Turning first to the financial results in the fourth quarter. Reported revenue grew 6% and organic revenue grew 3% in the period. Adjusted operating margins and EPS were roughly in line with our forecast at 18.3% and $0.65, respectively. We were very pleased to deliver such solid performance in the quarter, particularly given the tough comparisons versus the extremely strong fourth quarter we had in 2011.

Also during the fourth quarter, we made excellent progress on our productivity programs to rationalize our production footprint, shift production to lower-cost regions and better leverage our G&A expenses.

In addition, we continued to make strides in expanding our capabilities into targeted high-growth markets. For example, we completed the acquisition of Haoyuan Biotech, which is based in Shanghai and is a supplier of molecular infectious disease screening technologies. In addition, Haoyuan holds only 1 of 5 government approved licensing, allowing it to leverage its NAT technology in blood screening centers throughout China. The combination of PerkinElmer's distribution channel and capability and Haoyuan's leading automation assay technology and manufacturing expertise creates a formidable competitor in the large and growing Chinese blood screening and diagnostic markets.

Also in the quarter, we announced our entry into the noninvasive prenatal testing market through a collaboration with Verinata Health. We believe that incorporating Verinata's verified test into PerkinElmer's extensive distribution channel will further extend our leadership position within maternal fetal health and help to accelerate the broader adoption of noninvasive prenatal testing.

Now looking back at the full year 2012. Reported revenue grew 10%. Organic revenue grew 5% and we expanded adjusted operating margins by 100 basis points. This improved profitability translated into adjusted earnings per share growth for 2012 of 13%, resulting in adjusted EPS growth of over 100% over the last 5 years.

We achieved this strong performance by continuing to strengthen our organization and technical capabilities, and focusing on serving customers in attractive high-growth end markets.

Through targeted investments such as our new Shanghai headquarters and application centers and our new customer relationship center in Krakow, Poland, in addition to increasing the number of emerging market-based employees from 1,500 to 2,000, we expanded our emerging market presence, which now accounts for nearly 30% of total revenue.

On the innovation front, bolstered by a $30 million -- $38 million increase in R&D spending over the last 2 years, we have delivered breakthrough solutions across our detection, imaging and informatics capabilities. A few highlights include the introduction of our direct sample analysis for mass spectrometry that utilizes a disruptive approach to sample preparation, producing results in only seconds, allowing advanced chemical analysis of many sorts of samples.

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