Thermo Fisher Scientific Inc (TMO)

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Thermo Fisher Scientific (TMO)

Q1 2011 Earnings Call

April 27, 2011 8:30 am ET


Peter Wilver - Chief Financial Officer and Senior Vice President

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

Kenneth Apicerno - Vice President of Investor Relations and Treasurer


Derik De Bruin - UBS Investment Bank

Jonathan Groberg - Macquarie Research

Ross Muken - Deutsche Bank AG

Tycho Peterson - JP Morgan Chase & Co

Quintin Lai - Robert W. Baird & Co. Incorporated

Marshall Urist - Morgan Stanley

Sung Ji Nam - Gleacher & Company, Inc.

Peter Lawson - Mizuho Securities USA Inc.

Isaac Ro - Goldman Sachs Group Inc.

Doug Schenkel - Cowen and Company, LLC

Jon Wood - Jefferies & Company, Inc.

Amit Bhalla - Citigroup Inc

Charles Butler - Barclays Capital



Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific First Quarter 2011 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 Apicerno

Good morning, and thank your 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 our Investors section of our website,, under the heading Webcasts and Presentations, until May 20, 2011. A copy of the press release of our first quarter 2011 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-K for the full year ended December 31, 2010, 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 2011 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.

Marc Casper

Thanks, Ken. Good morning, everyone, and thank you for joining us for our first quarter 2011 earnings call. I'm pleased to report that we're off to a good start to the year delivering double-digit growth in our primary financial metric, adjusted earnings per share. We achieved record first quarter EPS results and also expanded our adjusted operating margin through our ongoing focus on productivity. All in all, we had a solid performance in the quarter on top of the exceptional Q1 results we reported in 2010. This puts us in an excellent position to deliver on our goals for the full year.

Let me review our first quarter highlights. As I said, adjusted EPS was a first quarter record, increasing by 12% to $0.92 per share. We expanded our adjusted operating margin by 30 basis points to 17.6% in the quarter. Our investments in research and development continue to strengthen our depth of capabilities across our technology portfolio and we had an excellent quarter in that regard. I'll talk later about the new launches we highlighted at PITTCON in March.

Growth in emerging markets was particularly strong in Q1. For example, we had greater than 20% growth in China and over 30% growth in India and Brazil. I've talked a lot about our continuing investments to expand our Asia-Pacific presence. During the quarter, we announced our plans to build a new factory in Suzhou, to support China's focus on building out its R&D infrastructure. This will give us the capacity to produce laboratory consumables for growing local life sciences markets.

I was in China the week they unveiled their 12 five-year plan and it's exciting to see how closely Thermo Fisher is aligned with their priorities in healthcare and life sciences, environmental protection, energy and public safety. I'd like to say a few words now on Japan, which represents about 3% of our total revenues. Although we don't have any manufacturing there, we do have extensive commercial operations in the country. Most important, we were relieved to learn that all 400 of our Japanese employees were safe. We also learned that we had no damage or significant interruption to our operations. I have to say that I'm extremely proud of how our leadership team in Japan responded to the crisis on all fronts. Concern and support for our employees was the first priority, then they made contingency plans for the business so we could continue to serve our customers.

So despite the horrific situation, our Japan team managed through the quarter with no significant negative impact on performance. Our best view on the outlook for Japan at this point is that we don't see a material impact on our business, but we'll continue to watch the situation closely and of course, we'll take the appropriate actions as necessary.

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