Thermo Fisher Scientific Inc (TMO)

TMO 
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Thermo Fisher Scientific (TMO)

Q1 2013 Earnings Call

April 24, 2013 8:30 am ET

Executives

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

Analysts

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

Ross Muken - ISI Group Inc., Research Division

Daniel Brennan - Morgan Stanley, Research Division

Steve Willoughby - Cleveland Research Company

Derik De Bruin - BofA Merrill Lynch, Research Division

Doug Schenkel - Cowen and Company, LLC, Research Division

Daniel Arias - UBS Investment Bank, Research Division

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

Vamil Divan - Crédit Suisse AG, Research Division

Amit Bhalla - Citigroup Inc, Research Division

Isaac Ro - Goldman Sachs Group Inc., Research Division

Peter Lawson - Mizuho Securities USA Inc., Research Division

Daniel L. Leonard - Leerink Swann LLC, Research Division

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2013 First Quarter Earnings Conference Call. My name is Sharon and I will be your operator today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. 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, thermofisher.com, under the heading Webcasts and Presentations until May 17, 2013. A copy of the press release of our 2013 first quarter earnings 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, 2012, 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 2013 earnings and future expectations and also in the Investors section of our website under the heading, Financial Information. So with that, I will now turn the call over to Marc.

Marc N. Casper

Thanks, Ken. Good morning, everyone. Thank you for joining us today for our first quarter earnings call. We're very pleased to report a solid Q1, and we'll go through the business highlights in a few minutes as we usually do. But before I discuss the quarter, I want to spend a moment on our exciting announcement last week of our agreement to acquire Life Technologies. This acquisition represents the largest transaction for our company since the merger that created Thermo Fisher Scientific. It will make us an unrivaled leader in our industry, serving customers in research, Specialty Diagnostics and applied markets. Combining the leader in genomics with the leader in proteomics will establish technology and innovation leadership across key life sciences markets. The transaction also expands our commercial infrastructure and global presence, making us the ultimate partner for our customers. We're going out to Carlsbad next week to meet with the members of the Life Technologies team and begin the integration planning. As we said last Monday, we look forward to completing the transaction early in 2014.

With that, I'll now move onto our Q1 results, starting with our financial performance, which is what we're focused on discussing today. As you read in our press release, we continued our trend of consistently delivering strong double-digit adjusted EPS growth in Q1. We had a 17% increase year-over-year that set a new record. Revenue was a first quarter record, growing 4% over last year. In terms of our adjusted operating income, we grew 7% with 40 basis points of operating margin expansion. So we performed well and in line with our expectations, even though the underlying market conditions were challenging. Two factors, in particular, created more pressure on the top line: first, sequestration took effect in the U.S. in early March, as we had assumed it would; and second, we haven't seen a recovery in global industrial markets. In fact, some have weakened. As a result of these factors, we've implemented some additional contingency actions. I am pleased to say that our teams executed very well to deliver solid performance in Q1.

Let me briefly describe what we saw in our key end markets in the first 3 months of the year relative to the expectations we laid out for you during our last call. From an overall perspective, I would say that the dynamics in our key end markets played out at the lower end of what we factored into our guidance range for the year.

Read the rest of this transcript for free on seekingalpha.com