PerkinElmer, Inc. (PKI)

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PerkinElmer (PKI)

Q3 2012 Earnings Call

October 25, 2012 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

Bryan Kipp

Ross Muken - ISI Group Inc., Research Division

Daniel L. Leonard - Leerink Swann LLC, Research Division

Zarak Khurshid - Wedbush Securities Inc., Research Division

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

Isaac Ro - Goldman Sachs Group Inc., Research Division

Daniel Brennan - Morgan Stanley, Research Division

Doug Schenkel - Cowen and Company, LLC, Research Division

Ramesh C. Donthamsetty - JP Morgan Chase & Co, Research Division

Derik De Bruin - BofA Merrill Lynch, Research Division

Daniel Arias - UBS Investment Bank, Research Division

Bryan Brokmeier - Maxim Group LLC, Research Division

Peter Lawson - Mizuho Securities USA Inc., Research Division

Steve Willoughby - Cleveland Research Company

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

Jonathan P. Groberg - Macquarie Research

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2012 PerkinElmer Earnings Conference Call. I have the operator for today. [Operator Instructions] As a reminder, today's conference is being recorded for replay purposes. And with that, I would now like to turn the conference over to your host for today, Mr. Tommy Thomas, Vice President of Investor Relations. Please go ahead, sir.

Tommy J. Thomas

Thanks, Regina. Good afternoon, and welcome to the PerkinElmer's Third 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 or from our toll-free investor hotline, 1 (877) PKI-NYSE. Please note, this call is being webcast live and will be archived on our website for 2 weeks from today.

Before we begin, we need to remind you, 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 other 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 the GAAP in the attachment, we will provide reconciliations promptly.

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

Robert F. Friel

Thanks, Tommy. Good afternoon, and thank you, all, for joining us today. I'm pleased to report another excellent quarter for PerkinElmer, in which we continued to make strong progress against our strategic priorities and also delivered solid financial performance exceeding our forecasted revenue growth and adjusted profitability.

During the third quarter, our adjusted revenue grew 11% year-over-year, which represents the 10th quarter in a row that we have reported growth of 10% or higher.

Organic growth for the quarter was 6%, and over the last 10 quarters, our organic growth has averaged over 7%. While Andy will get into specific details of the organic revenue growth, I would like to mention a couple of the key drivers of this strong performance.

Our Human Health business experienced 10% organic growth, with both our diagnostic and research businesses benefiting from strong demand in emerging markets, especially in Asia. In particular, our newborn screening, medical image and infectious disease testing all experienced double-digit growth in the quarter.

In our Environmental Health business, the majority of our growth came from the service business and the sale of environmental analysis products into emerging markets.

Our adjusted operating margins increased another 60 basis points in the third quarter after funding our planned spending increases on several initiatives to simplify our global manufacturing footprint, reduce our administrative costs and expand our capabilities into the emerging markets.

Marking this 10th quarter of consecutive double-digit adjusted revenue growth, I wanted to take a moment to give my perspective on why I think we've been able to continue delivering consistent and differentiated growth despite a choppy macroeconomic environment.

When signs began appearing in late 2008, that uncertain times might be on the horizon, we made a conscious decision to not back away from our long-term vision of the company's portfolio, geographic focus areas and critical mission. As a result, over the last 3 years, we have made important investments in every aspect of our business through acquisitions, acceleration of R&D spending and operational improvement initiatives. Ultimately, our performance over this period is an incredible tribute to the dedication and the excellence of our people.

Internally, our culture is now one where we all are deeply motivated by advancing our mission of improving the health and safety of people and the environment and energized by the positive difference that is being made.

The strength of our organization, our steadfast commitment to growth and our operational excellence have been critically important to advancing our mission, as our growth and increased profitability enables us to invest in new innovations and capabilities to solve our customers' needs.

In the past year, we've increased our spending in research and development by over $20 million to bolster our innovation efforts. And since the beginning of 2009, we have increased R&D spending by over $40 million, which represents approximately 10% of our increase in revenue during that time.

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