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Thermo Fisher Scientific (TMO)
Q3 2010 Earnings Call
October 27, 2010 8:30 am ET
Peter Wilver - Chief Financial Officer and Senior Vice President
Kenneth Apicerno - Vice President of Investor Relations and Treasurer
Marc Casper - Chief Executive Officer, President and Director
Derik De Bruin - UBS Investment Bank
Sung Ji Nam - JPMorgan
Dan Leonard - First Analysis
Jonathan Groberg - Macquarie Research
Ross Muken - Deutsche Bank AG
Tycho Peterson - JP Morgan Chase & Co
Quintin Lai - Robert W. Baird & Co. Incorporated
Paul Knight - Credit Agricole Securities (USA) Inc.
Marshall Urist - Morgan Stanley
Isaac Ro - Goldman Sachs Group Inc.
Doug Schenkel - Cowen and Company, LLC
Jon Wood - Jefferies & Company, Inc.
Charles Butler - Barclays Capital
Amit Bhalla - Citigroup Inc
Previous Statements by TMO
» Thermo Fisher Scientific Q2 2010 Earnings Call Transcript
» Thermo Fisher Scientific, Inc. Q1 2010 Earnings Call Transcript
» Thermo Fisher Scientific Inc. Q4 2009 Earnings Call Transcript
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 Webcast and Presentations, until Friday, November 26, 2010. A copy of the press release of our third 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 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 Form 10-Q for the quarter ended July 3, 2010, under the caption Risk Factors, which is on file with the Securities and Exchange Commission and available on 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 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 third quarter 2010 earnings and future expectations, and also in the Investors section of our website under the heading Financial Results.
So with that, I'll now turn the call over to Marc.
Thanks, Ken. Good morning, everyone and thank you
for joining us for our 2010 third quarter earnings call. We're very pleased to report excellent financial results, highlighted by record third quarter EPS performance. As I outlined earlier this year, we are intensely focused on achieving strong EPS growth, and we successfully delivered on that goal again this quarter. We are also pleased to announce that we are raising our EPS and revenue guidance for 2010, which we will discuss later during the call.
Let me begin by reviewing our Q3 results at a high level. As you saw in our press release, adjusted earnings per share grew 50% to our record $0.90 versus $0.78 in the 2009 quarter. I'd like to focus on the three key drivers of our EPS performance. The first, top line revenue growth; the second, operating excellence; and the third, disciplined capital deployment. So let me start with covering top line revenue growth. Revenues for the third quarter increased 6% to $2.68 billion compared with $2.53 billion in the 2009 quarter. Our Analytical Technologies segment contributed significantly to our revenue growth in the quarter. In our Analytical Instruments business, which you may recall had a solid first half, we saw even stronger revenue performance in Q3. In addition, our Clinical Diagnostics and Biosciences businesses continue to report strong growth. In our Laboratory Products and Services segment, sales of equipment and consumables were strong across academic and government, biopharma and industrial end markets.
I'll now turn to our second EPS growth driver, which is operating excellence. Let me start by saying how proud I am of our teams and how they delivered excellent operating performance in the quarter. Their sharp focus on successfully executing on their plans lead to solid Q3 results and positions us well to achieve our goals for the full year.
Our proven operating discipline also gives us the distinct advantage of being able to invest for the future. As we outlined at the beginning of the year, our plans for 2010 included increasing our investment in both technology innovation and emerging markets.
In Q3, we ramped up our R&D spend by 30 basis points year-over-year to expand our pipeline of new technologies. We also increased SG&A expense to continue to build our presence in emerging markets, particularly, Asia. One of the fruits of this investment is our new China Technology Center in Shanghai. This resource is focused on developing products and technologies in China, for China. In other words, specifically geared to the needs of our customers in that important market place.
It's important for me to note, even with these significant investments, we achieved 30 basis points of adjusted operating margin expansion during the quarter. Our excellent operating results are tied largely to a culture of practical processes improvement or PPI, which as you know, is how Thermo Fisher increases productivity to better serve our customers around the world. PPI and PPI Lean will continue to be important contributors to our operating results.