Q2 2006 Thermo Electron Corporation Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good morning, ladies and gentlemen, and welcome to the Thermo Electron Corporation second quarter 2006 earnings conference call. I would like to introduce our moderator for the call, Mr. Kenneth Apicerno, Vice President Investor Relations and Treasurer. Mr. Apicerno, you may begin your call.

KENNETH APICERNO, VP IR & TREASURER, THERMO ELECTRON CORPORATION: Good morning and thank you for joining us. On the call today we have Marijn Dekkers, our President and Chief Executive Officer, Marc Casper, Senior Vice President, and Pete Wilver, our Chief Financial Officer. Please be aware that this call is being webcast live and will be archived on our website, thermo.com, until August 25, 2006. To reach the replay of the call on our website, click on About Thermo, then Investors. Please also be aware that a copy of the press release setting forth our second quarter 2006 earnings and future expectations is available in the Investor Section of our website, under the heading Press Releases. I would like to begin the call by reading the 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 our Form 10-Q for the quarter ended April 1, 2006 under the caption Risk Factors, which is on file with the Securities and Exchange Commission and available in 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. 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 the non-GAAP financial measures used on this call to the most directly comparable GAAP measures is available in the press release setting forth our second quarter 2006 earnings and future expectations, and in the tables accompanying such releases in the Investor section of our website, thermo.com, under the heading Press Releases. Related information is also available in the Investor section of our website under the heading Financial Reports and then under Reconciliation of Financial Information, Q2, 2006. With that, I'd like to now turn the call over to Marijn.

MARIJN DEKKERS, PRESIDENT & CEO, THERMO ELECTRON CORPORATION: Thanks, Ken. Good morning, everyone. Thank you, again, for joining us for our review of the second quarter. Well, it was a very eventful quarter for us. First, we celebrated Thermo's 50th anniversary and then, of course, by far the biggest highlight was our agreement to merge with Fisher Scientific, which we believe brings together two highly complimentary industry leaders and will transform the life laboratory and health sciences industry. We believe this combination will benefit our customers by greatly increasing the breadth of innovative, integrated solutions that we can provide them, also by extending our global market coverage and by giving our customers access to the brightest minds in the industry, all in one Company. No doubt, Thermo Fisher Scientific will be better equipped to meet our customers' emerging needs than we were able to do as independent Company. We are really energized by the possibilities and we believe that we will be able to deliver compelling value to the marketplace and as a result, to our shareholders. I could spend a lot of time talking about Fisher.

I'm really excited about this merger, but this is still a Thermo earnings call, so I should spend some time on our quarterly results, which were also very good news. The financial highlights are Thermo's growth momentum continuing in the second quarter across the board. And as you can read in our press release, our overall revenues increased by 9%, with much of that being generated organically. Adjusted EPS rose 24%. Adjusted operating income grew 28%. And once again, we had excellent growth in our adjusted operating margin, which expanded 220 basis points to a second quarter record. Clearly, our growth initiatives and ongoing investments across the Company are paying off and we are benefiting from continued strength in our major end markets. And a quick word on what we're seeing in the markets. Industrial markets continue to be strong, particularly those related to the production of commodity material. And this benefits both our Measurement and Control and Life and Laboratory Sciences segment.

Pharma spending clearly up from last year, biotech is robust and academic markets are sort of middle of the road, but all together fueling good growth in Life and Laboratory Sciences. One of Thermo's most important attributes is we believe our solid track record of technology development. We have consistently launched significant new products that have raised the performance bar for analysis in a range of applications. And we are getting better and better at targeting the needs of our customers, so we can develop the right solution. I'm extremely proud of the fact that over the past 12 to 18 months, no Company has delivered mass spectrometer innovation at a faster pace than Thermo and we intend to build on that momentum. We had an exceptional showing at the recent mass spectrometry conference, ASMS, where we launched a number of new products with broad application. First, we introduced three new mass spec technologies. The first one a new TSQ Quantum excess triple quad, which adapts mass spec for use in nonlife sciences markets, such as environmental and food safety.

Second, our FAIMS technology, that when coupled with the triple quad, greatly increases sensitivity during bioanalysis. As you remember, feigns was part of our strategic acquisition of Ionalytics last year and it's clearly already beginning to pay off. And then thirdly, we introduced the LTQ XL, which extends our successful linear Ion Trap platform for faster screening of samples during drug development and proteomics. Now, in addition to these mass spec technologies, we also launched a high speed chromatography system, called Accela, that is designed especially for LC and LC/MS users working in drug discovery, quality control, academic, and food and beverage laboratories. And …