Thermo Fisher Scientific Inc (TMO)

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Thermo Fisher Scientific, Inc. (TMO)

Q1 2010 Earnings Call

April 28, 2010 8:30 AM ET


Kenneth Apicerno, Vice President, Investor Relations

Marc Casper - President and CEO

Pete Wilver - Senior Vice President and CFO


Ross Muken – Deutsche Bank

Jon Groberg - Macquarie Capital

Doug Schenkel - Cowen & Company

Marshall Urist - Morgan Stanley

Dan Leonard - First Analysis

Peter Lawson - Thomas Weisel Partners

Tycho Peterson - J.P. Morgan

Quintin Lai - Robert W. Baird

Jon Wood – Jefferies

Rob Hawkins - Stifel Nicolaus

Derik De Bruin – UBS



Good day, ladies and gentlemen. Welcome to the Thermo Fisher Scientific First Quarter 2010 Earnings Conference Call. My name is Carmel, and I’ll be your coordinator for today. At this time, all participants are in listen-only mode. (Operator Instructions)

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 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 be aware that this call is being webcast live and will be archived on the Investor section of our website, under the heading Webcast and Presentations until May 21, 2010. A copy of the press release of our first quarter 2010 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 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 Form 10-K for the year ended December 31, 2009, under the caption Risk Factors, which is on file with the Securities and Exchange Commission, and also available on the Investor 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 and therefore you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.

Also, during the 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 2010 earnings and future expectations and also in the Investor section of our website under the heading Financial Results.

So, with that, I’ll now turn the call over to Marc.

Marc Casper

Thanks, Ken. Good morning, everyone. And thank you for joining us for a review of our first quarter results in 2010. We’re pleased to report a strong start to the year with record revenue and EPS performance in Q1. I’m incredibly proud of our teams and their determination in achieving our operating and financial goals for the quarter.

Our production teams responded extremely well to increasing demands from our customers. Our commercial teams are making new connections for our customers across our portfolio to leverage our unique value proposition. And, as usual, we had strong results through practical process improvement or PPI which is how we increase productivity to better serve our customers around the world.

All of this helped to continue the growth momentum we began in Q4 and puts us solidly on track to meet our goals for the year. We have emerged from the recession a stronger industry leader as a result of the actions we took in 2009, and that is clearly evident in our first quarter results.

Let me give you a quick overview of our financial performance in Q1. We reported record first quarter revenues of $2.7 billion for the quarter, 19% higher than 2009. This translates to 13% organic growth, which was slightly better than we expected coming into the quarter.

The easy comparison with the very weak quarter last year and four more calendar days also helped. Still, we had strong operating performance across the company with solid double-digit revenue growth in both of our reporting segments, Analytical Technologies and Laboratory Products and Services. We also recorded strong double-digit growth not only in Asia but in the North American markets as well.

We’re pleased to report that our adjusted operating margin returned to historic levels, improving by 200 basis points year-over-year to 17.5%. This was primarily due to pull-through from a strong topline revenue growth and the continuing benefit of our cost saving initiatives including our on-going focus on PPI and global sourcing.

Last, we’re pleased to report that our adjusted EPS results for the quarter were first quarter record at $0.84, a 35% improvement over 2009. So, all in all, it was an excellent quarter and a great start to the year.

Let me spend a few minutes describing the conditions of our key end markets at this point. The take away here is that market trends are in line with our expectations and similar to what we experienced in Q4 of 2009.

Let me give you a high-level view of what we’re seeing four months into the year. In BioPharma markets, capital spending is still constrained but as we’ve said before, we believe we have the ideal value proposition to support new operating models being put in place by pharma companies to improve their competitive positions. Our top 20 accounts showed strong double-digit organic growth in the quarter, ahead of the company’s overall organic growth rate.

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