Hello, and welcome to BD's First Fiscal Quarter 2012 Earnings Call. At the request of BD, today's call is being recorded. It will be available for replay through Tuesday, February 14, 2012 on the Investors page of the bd.com website or by phone at (855) 859-2056 for domestic calls and (404) 537-3406 for international calls, using conference ID 42951440. [Operator Instructions] Beginning today's call is Ms. Monique Dolecki. Ms. Dolecki, you may begin your conference.

Thank you, Jackie. Good morning everyone, and thank you for joining us to review our fiscal first quarter results. As we referenced in our press release, we are presenting a set of slides to accompany our remarks on this call. The presentation is posted on the Investor Relations page of our website at bd.com. During today's call, we will make forward-looking statements and it is possible that actual results could differ from our expectations. Factors that could cause such differences appear in our first fiscal quarter press release and in the MD&A sections of our recent SEC filings. We will also discuss some non-GAAP financial measures with respect to our performance. A reconciliation to GAAP measures can be found in our press release and its related financial schedules and in the slides. A copy of the release, including the financial schedules, is posted on the bd.com website. Leading the call this morning is Vince Forlenza, Chief Executive Officer and President. Also joining us are David Elkins, Executive Vice President and Chief Financial Officer; BD Executive Vice Presidents, Gary Cohen and Bill Kozy; and Tom Polen, President of Diagnostics Systems. It is now my pleasure to turn the call over to Vince.

Thank you, Monique, and good morning. As we stated in our press release, we are off to a solid start this year and we are pleased with our performance in the first fiscal quarter. Revenue growth was 2.4% currency neutral, which was slightly better than our expectations. Fully diluted EPS of $1.21 declined by 9.6% on a currency-neutral basis. This reflects a $0.04 favorable benefit relating to various tax settlements in multiple jurisdictions, which we expected later in the year. Excluding the tax benefit, earnings per share would have been $1.17, which is in line with the expectations we outlined on our conference call in November. We saw softer results in the U.S. due to an uncertain research spending environment and difficult pricing comparisons versus the prior year. David will provide more details around this later in his remarks. We continue to see strong growth in emerging markets. Our initiatives around new product platforms and extensions and operational excellence programs continue to be on track with our expectations. We are also reaffirming our full fiscal year revenue and EPS guidance on a currency-neutral basis. On a reported basis, we are lowering our revenue and EPS guidance to reflect the impact of a strengthening U.S. dollar. We expect reported revenue and EPS growth to be about flat. Now I'd like to turn things over to David for a more detailed discussion of our first quarter financial performance.

Thank you, Vince, and good morning, everyone. I'd like to begin by discussing the key financial highlights for the quarter. As Vince just stated, the quarter was in line with our financial projections with revenue growth coming in a little higher than our guided range. We saw good performance in our underlying business and with solid growth coming from Accuri and Carmel acquisitions. We experienced higher expenses in the quarter due to increased investments in our business. EPS of $1.21 reflects lower gross margin and higher SG&A costs. This includes the effects of pricing erosion, higher raw material costs, the rollout of investments in emerging markets, higher legal costs and some acquisition-related expenses from Accuri and Carmel. This is in line with our expectations we outlined on our year-end call in November. As Vince also mentioned, we are on track to deliver our revenue and EPS guidance on a currency-neutral basis. We are lowering our full year guidance on a reported basis due to the strengthening of the U.S. dollar. Our revised guidance assumes a full year average euro exchange rate of $1.30. Additionally during the first quarter, we completed about $400 million of our $1.5 billion share repurchase plan. Our guidance for the program remains unchanged at $1.5 billion. Now let's move on to Slide 7 where we will review our revenue growth by segment, which I'll speak to on a currency-neutral basis. As I just mentioned, revenue growth was 2.4% for the total company. Pricing erosion was about 130 basis points, which is consistent with the guidance we provided on our year-end conference call. BD Medical first quarter revenues increased 2.6%. The growth in this segment was primarily driven by Diabetes Care with continued strong sales of pen needles and solid international growth in our medical surgical systems…

Thank you, David. Moving on to Slide 14, I would like to highlight our emerging market results. We continue to see strong growth in emerging markets, which accounted for approximately 22% of our total revenues in the first quarter. Emerging market revenues grew about 12% in total over the prior year. We continue to see double-digit growth in a number of key markets, with China growing at about 27%. We are very pleased with Safety revenue growth in emerging markets, which was up about 27% over the prior year. We will continue to accelerate our investment in geographic expansion, market development and market-appropriate product solutions to sustain long-term growth in these markets. Now moving on to Slide 15. On our year-end earnings call, we discussed a number of key product initiatives and milestones. I'd like to provide an update on these key initiatives. This fiscal year, we have many exciting opportunities in our pipeline. In our Medical segment, we launched the BD Nexiva Diffusics Closed IV Catheter System with a diffusion tip. This product is an innovation from the already proven and effective BD Nexiva Closed IV Catheter System. In the second half of the fiscal year, we also plan to launch the world's first 6-millimeter insulin syringe and our BD pentapoint pen needle, which is more comfortable and anticipated to be preferred by patients. In our Diagnostics segment, in the first quarter, we launched our BD Veritor CLIA-waived flu A & B test in the United States. This is the first flu test to be CLIA-waived in over 4 years and represents a significant advancement in the sensitivity of point of care-based flu testing. In the first month, we made about 70 new Veritor placements. Early customer feedback is positive. While we're making placements, the incidence of flu in…

[Operator Instructions] Your first question is coming from the line of Larry Keusch with Morgan Keegan. Lawrence S. Keusch - Morgan Keegan & Company, Inc., Research Division: Could you -- obviously, Safety, Vince, I think you said was strong in Western Europe and obviously in the emerging markets. Could you just remind us sort of where we stand with the whole program in Europe for the adoption of safety? How much is left on that time line and kind of where do you think we are at this point relative to the adoption?

Yes, Larry, you're referring to the fact that a couple of years ago they set a 3-year deadline and where are we in terms of moving towards that whole implementation, so I'll ask Gary to talk about that.

Sure, thanks. This is Gary. So you're testing my memory a bit. I believe it's around June 2013 that the compliance -- the official compliance state occurs, although we're getting solid conversion growth already in Western Europe. We're seeing strong growth overall in a number of countries, particularly the northern countries in Western Europe. And I should also mention we're getting double-digit growth in Safety now in every market except the U.S. and Canada, which have been more largely converted with particularly strong growth in Latin America and Asia Pacific, but also EMA and even Japan. So we're just seeing strength across-the-board in the markets that still have a ways to go to full transition. And we can anticipate, particularly in Europe as we move toward that compliant state that, that growth should continue.

Your next question comes from the line of Brian Weinstein from William Blair. Brian Weinstein - William Blair & Company L.L.C., Research Division: Question then. Probably -- maybe you can quantify the impact of the lighter flu season not just on Diagnostics, but also what it might have meant in the Medical segment as well.

I don't think we really have a quantification of the flu. It's not -- the flu was not really material to our results. We really haven't seen any flu year-over-year. Brian Weinstein - William Blair & Company L.L.C., Research Division: Okay, and then a quick follow-up. You talked a little bit about what the euro is expected to be. In your model, I think you said 1.3. Can you just go through what your exposure is to the euro and then the other currencies, can you refresh us on that and then what the assumptions would be on some of those other currencies as well?

Sure, David can talk to that.

Sure, the euro, we have a little over $2 billion in euro-related sales and we haven't broken out the other currencies other than to say that the other exposures are Canadian dollar, the Australian dollar, the Brazilian real and the Japanese yen.

Your next question comes from the line of Jon Groberg with Macquarie.

Maybe just focusing on the Biosciences segment a little bit. Can you maybe just talk about other players in that space have seen varying degrees of weakness or saw it throughout 2011. Sounds like it hit you pretty hard in the U.S. here in this last quarter. Can you maybe just talk about how that played out and then also why you're comfortable with that business kind of overall improving in the -- for the remainder of the year given that there could be even more uncertainty with potential cuts with sequestration. So maybe just kind of talk about your outlook for that business.

Sure, Jon. As you mentioned, it was really the U.S. market where we saw the difficulties, and Bill will break that out a little bit more for you. Europe and the rest of the world did well in that business. And you're right also, Jon. From just talking to folks around the industry, I think the research market, depending on the segment you were in, you more or less saw what we were talking about that. But there was some variability there. But in particular, we saw the uncertainty affecting our customer base in the academic and the government marketplaces and some impact for biotech, and Bill will break those out for you.

This is Bill. Just 2 factors, as Vince just referenced. Number one, we saw a notable slowdown in the pharma and biotech purchasing, and this was driven mostly by significant restructuring that we saw across several of the major pharmaceutical companies as they're in the process of assessing their R&D as well as moving significant volumes of R&D offshore. And generally speaking, it touched a number of our Big Pharma customers, so that was factor one. Factor two relates to the academic and government spending and there was some uncertainty created by -- many of the discussions, by the way, that you've followed related to the NIH budget. As you know, that budget never got finalized until December 23, 2011. So we pretty much went through a whole quarter where a lot of our grant-driven procurement activities were really slowed down and delayed. So to get back to the other part of your question, Jon, the reason we've got a little bit of optimism in the remainder of the year now that the budget is set and even though it's only at a 1% increase, there is some stability in some of the understanding of available funds, and we think that will help us in the remainder of the year in terms of some bounce back. The single biggest impact in the quarter was because of this uncertainty was on high-end instruments, things like Aria, some of our high-end sorters and analyzers. And again, we know that there's a little bit of interest in those instruments and we're expecting that to be a factor also in a little bit of the U.S. recovery in quarters 2, 3 and 4.

Your next question comes from the line of Mike Weinstein with JPMorgan. Kimberly Weeks Gailun - JP Morgan Chase & Co, Research Division: This is Kim in for Mike. So I guess 2 questions. The first is on the updated guidance and wanting to come back to the change in outlook relative to FX. So it looks high to us, first of all. It looks like you've raised that FX headwind for the year by about 100 to 300 basis points relative to early November. And if we're looking at it in our currency models just that delta and maybe this is just the euro, but we're looking at really across your currencies, it looks like it should be closer to 100 basis point delta. So just maybe, David, if you could help us understand how we could get ourselves to that, call it, 300 basis points of incremental pressure from FX.

Yes, I think -- it really comes down to the major movers, the euro, but obviously other currencies that have moved as well. But for the remainder of the year, obviously where we were at the first quarter was around 1.36. For the remainder of the year, we're anticipating that to be in the high 1.20s, which gets you to about a rate of 1.30 for the full year and that's versus the rate of last year, which averaged around 1.40. So that's the biggest driver. But as you know, the dollar has moved pretty consistently across most currencies. Kimberly Weeks Gailun - JP Morgan Chase & Co, Research Division: Okay. So you're using for the rest of the year a euro into the 1.20s.

That's right, high 1.20s. Kimberly Weeks Gailun - JP Morgan Chase & Co, Research Division: Okay. And I guess the follow-up is I wanted to ask maybe Vince to talk about on the investment spending side, particularly as we look at the EVEREST program, the SAP upgrade. Can you just talk through the cadence of that spend in fiscal '12 and '13 and relative to when you're going live in Europe, when you're going live in the U.S. and kind of how you would compare the overall level of spend for EVEREST in fiscal '12 and fiscal '13.

Sure. So our first go live is going to be this year, Biosciences. And then next year, we'll have a go live for North America and then another wave following that. But from a spending perspective, the spending on the project continue -- it increased '11 to '12. It will continue to increase in '13 and then the project spending will go down. And as we go live, the amortization of the system kicks in, which means that spending starts to flatten out after you get past '13. That's the dynamic on the system. Right now, the project is on track. It's obviously a large effort. Our Bioscience group is doing a great job on it, but that's the dynamic that we have. Kimberly Weeks Gailun - JP Morgan Chase & Co, Research Division: Okay, that's super helpful. And so can you quantify for us, just ballpark what that spending is, sort of what the impact on the SG&A line is in terms of kind of the spending on EVEREST this year and next?

Well, for this year, David, year-over-year, I think the increase is about 25, 20?

Yes. Around 20 to 25 in that range, and we haven't quantified it for next year at this point.

Your next question comes from the line of David Lewis with Morgan Stanley.

Just maybe one question, one very quick follow-up. Just first off, Vince and maybe for Gary as well, you talked a lot about European austerity pressures. I just sort of noticed in the quarter China remains very strong for the company. In the last several weeks, we've seen sort of some macro weakening across China mainland. Is there any sort of economic sensitivity to the business in China we should be thinking about throughout the remainder of the year? Or from what you've seen, the business remains very well insulated in China?

So we don't think so. We've been talking to our China team about it, and Gary can comment on what we're hearing directly from them.

This is Gary. What our team is seeing is that while there may be some downward pressure on overall GDP growth, we're not seeing that downward pressure on health care investments. What they're tracking is the level of commitment the Chinese government has, the Central Government to rolling out the investments in health care, which clearly seem to be remaining on track. And also what's funding that are the tax revenues. And if you dig a little deeper, you see the tax revenues that the Central Government is getting are actually up. They're probably higher than what had been expected, and that's what's behind the funding for health care. So we're not seeing that slowdown. We've been asking the same question, watching the same indicators and what we're seeing so far is that the health care investments are remaining on track.

Okay, and then, David, just a real quick follow-up. On Discovery Labware, you talked of product rationalization. Could you sort of give us some more granularity on that?

Yes, we've continued to look at products within our portfolio that may be growing slower than the company average, but as well from a profitability perspective, from profitability perspective that we're looking to rationalize. So there are several products in order to drive efficiencies in the supply chain, we rationalize SKUs. So as we start to do away with some of those products, that impacts the sales growth the first year you do it. But again, further out years you start to see improvement as a result of that.

Your next question comes from the line of Kristen Stewart with Deutsche Bank.

I was wondering if you could just quantify for us the impact of acquisitions both from a top line perspective as well as from the earnings perspective. Because I think you had mentioned last year that those might be a little more dilutive earlier in the year.

Sure, David can take that.

From a margin perspective, what we had said for the full year on our gross margins, the acquisitions would dilute margins by about 20 basis points. In the quarter, obviously, it's a little heavier when comparing versus prior year. It was around 30 basis points. As we talked about on the acquisitions from a revenue perspective, on the Accuri, it was about 1 to 2 basis points of growth we anticipate getting for the full year this year. And Carmel Pharma -- I'm about to give that number for you on what we think the full year impact is on the Medical business.

For the quarter, we spent $20 million in sales for the 2 of them.

Okay, so on an organic level, do you have the organic growth feed on the top line for this quarter?

Yes, as Vince just said, it's about $20 million worth of sales in the quarter. That's relation to both acquisitions.

Bill's got a follow-on comment here, Bill?

Just to the get to the question, Accuri -- excuse me, Carmel will contribute this year incrementally. Remember, we acquired that in August of the fourth quarter of last year. So just fiscal year '12 incremental impact about $45 million of revenue.

For the year.

For the year.

Your next question comes from the line of David Roman with Goldman Sachs.

I wanted to come back to Biosciences and maybe for David's comments on the rationalization of certain parts of the Labware business. How much of the reduction in guidance is due to weak underlying market trends versus the rationalization of those product categories?

So I'll let Bill Kozy actually walk you through that but -- Bill, do you want to talk to that?

Sure, this is Bill. Actually, our international sales in the Labware business were relatively solid, and the most significant impact of the rationalization did take place in the United States. As David mentioned, these are products that weren't contributing a lot of long-term growth or profitability to the unit. And our guidance is not in any way affected by the DL activity. We already have started that in 4Q of last year. It'll carry through our 3Q of this year and then it'll be behind us.

It was about 1/3 of the reduction in the U.S. if I remember correctly, right? Of the total U.S.?

Of the total U.S. decline.

And so it was a fraction of that.

If we took the $12 million, it's $3 million to $4 million impact on the quarter.

Got it, okay. And then a follow-up. I don't know if you've had a chance to review the IRS filing on the med tech tax, but it looks as though some of your businesses actually might be excluded from that such as the Diabetes. Can you maybe provide some clarity as to which of your franchise, you think, fall in the exclusion category from the medical device tax that begins in calendar '13?

David, you have a...

Yes, some of the diabetes businesses are excluded, our Biosciences and a good portion of our Diagnostics business would be excluded from the tax. So as we talked about before, it's a little more than $2 billion in revenue that would be exposed to that tax, and initial indication is 2.4%. It's around a $55 million impact to our business next year. We're going through -- as everyone else just received this on Friday, we're going through and evaluating the details and going SKU-by-SKU so we can a better figure of that. We'll let you know as soon as we finish that work. We'll let you know.

Your next question comes from the line of Amit Bhalla with Citi.

I wanted to see if you can go into a little more detail about the strength in Women's Health Care and Cancer and the level that you believe that is sustainable there?

Sure. Tom Polen will take that.

Amit, this is Tom. So, overall, we saw in Women's Health and Cancer we were 6.9% for the quarter. And if you look at actually our last few quarters, we've been growing at that rate, so we see a continued -- that's been the trend for the last few quarters and we see that trend going forward as well as certainly for the balance of this year it's sustainable and we don't see an end in...

And Tom, can you go into a little more detail about the growth rates between TriPath, GeneOhm and STD?

Yes, will do. Let me just finish a note there on Women's Health and Cancer specifically. So we still see the U.S. being relatively flat with the Pap volumes, relatively flat due to both low physician visits and extended intervals. X U.S. is really what's driving that growth, and we're seeing double-digit growth in nearly every single region outside of the U.S. For your other question regarding molecular STDs and then the separate question on GeneOhm, so in molecular STDs, we saw solid growth at 4.5% for the quarter. GeneOhm was a tough quarter. In fact, we were just over 1% in the quarter for GeneOhm and the mix of that is we're continuing strong double-digit growth in our C. difficile business there, north of 25% growth, but have seen that offset by a performance in MRSA and that's due to new competition driving down price in the market for MRSA as well as the rollout of some lost accounts that I mentioned last year where we are also still seeing customers hold for MAX on MRSA. Of course, we've just launched MRSA about a month ago in Europe. Sales are ramping up there, and we have MRSA in the U.S. planned for a launch in Q3.

Okay, great. And if I just have a quick follow-up for David. David, you talked about hospital acuity being an issue over the last quarter or so. Can you just give us an update on what your latest thoughts are on the impact from hospital acuity?

Yes, we really haven't seen any further deterioration. Pretty steady in the quarter on where it's been, so I think it's positive. We're seeing things stabilize out there.

Your next question comes from the line of Jon Wood with Jefferies. Jon Davis Wood - Jefferies & Company, Inc., Research Division: So Vince, just going back your guidance for 3% to 4% top line in the second quarter, it looks like that's the toughest comp of the year. First, am I accurate in that statement? And second, if that's true, it just seems like you've got a bit more core momentum in your business than that 2% to 4% for the year would suggest. So would you give us some kind of clarity around pacing?

Well, I would come back to what David just said, which is we did see a stabilization. If we talk clinical marketplace now and put aside the research market for Biosciences and say clinical seemed to stabilize and of course, that was a concern going into the year and I think you see that reflected in our second quarter guidance. You also see a bounce back in the pharm systems business, which also helps us as well. So it's those issues that are causing the pattern that we're talking about. And as Bill mentioned, we'll see what happens on the life science side with now that the NIH budget is set because we just saw people not just on NIH-funded programs, but other academic programs just kind of in a hesitation mode. So those are the things that are impacting. David, anything else on that?

I think the only other thing I'd add, Vince, is on the way to think about it is there has to be a deterioration from where we are today to be at the bottom end of our revenue guidance, and at the top end we would see continued improvement. Jon Davis Wood - Jefferies & Company, Inc., Research Division: Okay. So Vince, it's safe to say that based on your first quarters numbers and your second quarter guidance that you feel marginally better about the world at this juncture than you did last update. Is that correct??

Well, I would say we feel marginally better about the clinical marketplace. I'd say we feel consistent with Biosciences outside of the U.S. And of course, we had some issue in the U.S. Those are the pieces. I feel very good about emerging markets, quite frankly.

Your next question comes from the line of Bill Quirk with Piper Jaffray.

First off, I guess it looks like excluding the emerging markets, the balance of business was pretty flat in the quarter. If we think about, I guess, longer-term resource utilization, Vince, what type of, call it, 3-year growth are you funding in the developed world and how dependent are you on this between new product development versus, say, macro improvements like NIH stabilization, for example?

So I'm trying to make sure I understood your question, first off. So you were talking about the research business and the longer-term trends in research funding and how we see that and how things might be impacted.

Actually, Vince, I'm speaking kind of more broadly to the developed market in terms of as you -- the company has obviously made efforts to increase emerging markets resources and focus a lot of the growth there. If I turn the business to the developed side, what are you thinking from a 3-year standpoint and how do we get there?

Sure. So we do see that growth will come back in the developed world and it is going to be driven by new product development. So just take for a second and we say, stabilization in volumes and in the marketplace because of improving economic conditions. Number one, in the U.S., it's a wild card, which I cannot predict, which is going to be the impact of health care reform. One would think in the back half of '13, '14 time frames you would start to see some impact, there's some positive impact as the economy gets better and people are covered by health care reform. We haven't quantified that. But we're watching that and that could be a positive. Then from the new product side and I can't split it into developed versus developing, but many of the new products that we're talking about are going to have their major impact in the developed world, and we said that was about for the products we went through on our Analyst Day, if you go back and look at that presentation, that's about 250 basis points of growth. And a lot of that is going to be driven in the developed world. And then of course, expansion. Those products will hit the developing world as well, but probably a little later term. But the molecular assays will be first. So we've got both of that. Gary, you want to make a comment on emerging?

Well, the only thing I would about the developed world, in fact, is even now in Western Europe the picture when you look at the total continent or the area of Western Europe, it's not as clear as if you start to break it to its pieces. We have 8 country organizations in Western Europe, and 5 of those 8 are growing and some of them are growing quite nicely. Then you have, one, France where we ship all pharmaceutical systems in Europe out of France and because of the impact of pharmaceutical systems, that's down. And then Italy and Spain, as you might expect, because of economic conditions are slightly down, but we're getting very good growth otherwise from Western Europe. So even now, driven by Safety other factors, the developing -- the developed world picture there is a little better than what it looks like.

Your next question comes from the line of Bill Bonello with RBC Capital Market.

Yes, I was hoping to follow up a little bit on the pricing comments both if you can just give us a little bit more detail, sort of where -- I don't mean geographically where, but product where you saw some of the pressure and then you specifically made a comment about seeing increased competition in MRSA that was driving down price and maybe you could just tell us what that is?

Sure. We said 130 basis points in the quarter, which was in line with what our expectation was. We knew we would have more pricing in the first half of the year than the second half of the year. Going back to last year, remember we talked about that about half of what we were seeing coming into this year was driven by a one-off situation in our Med/Surg business. We're seeing the majority of the pricing issues in device businesses not so much on Diagnostics -- I'll come back to MRSA in a second, and not so much -- just a little bit in Biosciences in the research reagents, which has gone on for a number of years, but not really the instrument side. Not so much the clinical piece of it, but the research reagent. On MRSA, it's probably -- I'll let Tom comment, but I think it's more Roche as a new entrant coming into the marketplace.

Yes. So specifically, it wasn't -- as Vince just mentioned, last year about mid-year, Roche entered into the marketplace. It had been primarily -- in fact, Roche entered in at a substantial price discount north of 30% price discount and their approach. And so we're seeing MRSA pricing down year-on-year overall about 5%, and that's where you see that impact. We've all seen pricing as an issue across the rest of the Diagnostic business. It would seem very focused within that MRSA space.

Okay, and is that a -- sorry to have to ask this, but is that a U.S. market entry?

That was a U.S. market entry, happened midpoint last year.

Your next question comes from the line of Miroslava Minkova with Leerink Swann.

I was wondering if you could help us understand the impact of the Biosciences business declining in the U.S. this quarter on your gross margins. And with that, perhaps if you could help us also understand when do we see your gross margins perhaps recovering from here?

All right. Well, I can't talk -- I'm sorry, this is Vince. I can't break out the impact of the decline in the U.S. margin on how that translate into gross margin, but I wouldn't expect it would be a very big impact. In terms of where our gross margins go, we're sticking with the gross margin guidance that we gave you in the beginning of the year. We haven't changed that. Now remember what's going to happen here is that the pricing comparisons are going to change over the course of the year, number one. So I'll give you a couple of factors why it's going to improve. Number two, the raw material cost is a figure in negative in the first half of the year as well. Three, amortization and deal costs are kind of front-end loaded a little bit as well. So you have all of those 3 things impacting the first half of the year disproportionately. So that's why we're lower right now, and it will improve over the course of the year.

Okay, great. That's very helpful. And just a bit of a more broader picture question also in the margin side. Your operating margins sort of -- and I understand there is a lot of investment and factors going into that, but they're kind of at the very low in the last at least 5 years that we've seen them. I guess I'm kind of wondering if you would be willing to provide some of your thoughts on whether you see your operating margins recovering to the levels that we've seen them in the past and what could take you there and how long it might take.

So I'm not going to forecast, but I will tell you this that we still remain committed to 50 basis points a year in terms of operating leverage. Some years we get it, some years we don't. Some years we get more or less. We're working very hard on it. We haven't really talked through ReLoCo I, ReLoCo II as part of the call today. Those programs are on track, number one. Number two, on the G&A side, the shared service centers are still in investment mode. In a year or so, they start to turn positive. We talked through the EVEREST impact, that EVEREST goes up next year then it starts to flatten out, and so we haven't -- and then the investments in emerging markets we're comfortable that they are going to pay off. We're seeing good progress on those pieces. Then lastly, we have the new products that I spent a lot of time on the prepared remarks going through and those new products have good margin. So there's a mix impact as well. And lastly one other factor, which is this growth in Safety that we're talking about with both Europe doing well and starting to do better and emerging markets doing well, those are a whole series of factors that factor into our analysis on the margin going forward.

[Operator Instructions] Your next question comes from the line of Peter Lawson with Mizuho Securities.

Maybe just a clarification. That $0.15 delta, this is the prior year guidance, it sounds like it's all FX and not higher assumed costs coming from Carmel or any other puts and takes.

That's correct. It's all currency.

And then R&D, is there any change in the outlook on this year being a kind of a high year for investment into R&D? Just seemed that you had lower R&D costs in the quarter. I just wondered if that was a lever you pulled as you saw rising costs.

Peter, no. If you go back and look at last year, we had an unusual pattern in the first quarter, where R&D spiked in the first quarter because of some timing on some projects. So no, it's just an anomaly in the spending pattern.

Your next question comes from the line of Jonathan Palmer with CLSA. Jonathan J. Palmer - Credit Agricole Securities (USA) Inc., Research Division: Vince, you mentioned emerging markets and the China growth. I was wondering if you could give us some color on the markets that may be outside of China.

Sure, Gary can do that for you because quite frankly, we're having some good growth in those other markets as well.

So we -- this is Gary. We had double-digit growth in all the emerging markets in the first quarter. We had a particularly strong quarter in EMA, Europe, Middle East, Africa, and that was some impact of year-to-year comparison. Also, particularly a lighter fourth quarter last year, but it was very strong growth in the first quarter. And that tends to be a little lumpy based on the timing of some major orders. We actually had one aspect in the first quarter around immunization sales units that was lower than expected, so -- but despite that, we had very strong high teens double-digit growth in EMA. We had double-digit growth again in Latin America. We had strength throughout all the country hub organizations in Latin America, particularly in the southern part, Brazil, Argentina, Chile. Very strong. In Asia Pacific, we had double-digit growth, which we are anticipating with our investments to sustain through the year. So we just had a really solid quarter in emerging markets right across-the-board. Jonathan J. Palmer - Credit Agricole Securities (USA) Inc., Research Division: And then one quick follow-up, if I could. On ReLoCo, any improvement in terms of the targets or timing?

Yes, the program is on track, really hasn't changed.

Your next question comes from the line of Doug Schenkel with Cowen and Company.

Thanks for taking the question, which is a clarifying one on Biosciences. In listening your prepared remarks and answers to some of the other questions on the call thus far, it sounds like there were 3 negative dynamics that impacted Biosciences in fiscal Q1 and how you're thinking about the business moving forward through the year. The first was the uncertainty related to the outlook for funding in the U.S. The second was some product rationalization on your part. And the third was, I guess, a change in Big Pharma spending patterns. So if that's the case, it seems like the uncertainty related to research funding was there when you provided guidance for the year 3 months ago. I imagine you were planning for some of the product rationalizations that you mentioned on this call. So was the major change really that Big Pharma dynamic? And I guess did you see improvements in the U.S. academic and market at the end of the quarter that some others have spoken about?

So Big Pharma was certainly a new change we were not seeing in the fourth quarter, number one. Number two, on the academic and NIH side, there was a bigger impact than we anticipated. We were seeing some falloff in the fourth quarter. We couldn't quite tell whether that was a trend or not so it was bigger than we thought when we gave you the guidance. On the rationalization, the rationalization certainly impacted the results. It's kind of noise in the background. I don't want to make a big deal about that, so -- and then there was just some timing on some things in the marketplace. So those are the major impacts. Now going forward, we'll have to see how the U.S. market shakes out from a research standpoint.

Okay, that is helpful. I guess just one very quick follow-up. Some of the other companies that you compete with said things got a little bit better at the end of the quarter, as there's a little bit more certainty in that end market. Did you guys see that as well?

Not yet.

Your next question comes from the line of Nandita Koshal with Barclays Capital.

Vince, if you could comment a little bit broader and longer term on the pricing environment and how we should think about pricing for BD going forward, is it basically weak and down 1 percentage on an ongoing basis, or is there something that changes in terms of the environment?

Sure. So let's focus on this year and as we said slightly over 100 basis points and that a little less than half of that is a rollout of a one particular situation where we were -- it was a competitive situation that a 3-year contract, a bunch of 3-year contracts were all up at the same time, and you had a competitor who had expanded their capacity and was looking to fill volume in a plant. So that's half of what we saw going into this year and was built into our expectation. In terms of the pricing environment going forward, we're not seeing any changes based on what we saw this year in the way people buy, the tender structures. And obviously, we will keep our eye on that going forward.

Okay, and I guess x U.S. more than in the U.S., are you seeing any government-related sort of programmatic price cuts either in Europe or the pharma companies, for instance, are certainly seeing those. Are you seeing that on your side of things? And then even in China, we're hearing some fairly bearish commentary around pricing as that broader health care coverage is built out. So is that consistent with what you're seeing or is it different?

Sure. So first off, just to back up a little bit. Between '11 and '12, we're not really seeing much of a change in pricing. We're certainly not really seeing what you're talking about in Europe for the pharma companies, and Gary can give you a little more color on what we're seeing. But I don't think we're seeing any big change in these environments. Gary?

This is Gary. I just want to mention that we, based on the nature of our businesses, have been working in a highly constrained pricing environment for many years historically. And I would say in Western Europe that may be intensifying somewhat, but it's not a fundamental change. So we're seeing governments being a little bit more price oriented in their tenders, but I would consider that more of a evolutionary rather than revolutionary change in pricing perspective and more of a continuation of what we're accustomed to. Likewise, I would say in the emerging markets, it's -- we have to know how to serve those markets very efficiently from a price and cost perspective and align what we do to the access requirements of being able to buy our products at a very reasonable cost. And that's something we're also accustomed to. So in that respect, these are not changes in the environment, let's say, like we saw in the U.S., particularly around the product that Vince mentioned.

But most of the pricing pressure we see, the majority will be in U.S. and Europe, some small amount in emerging markets.

Your next question comes from the line of Sara Michelmore with Brean Murray. Sara Michelmore - Brean Murray, Carret & Co., LLC, Research Division: Most of my questions have been answered, but as we think about this pricing dynamics and some issue that happened in U.S., I'm just wondering if you can talk about the competitive environment for the infusion systems and the injection products because typically we do think of those as being areas where you have very dominant market shares, and I'm just wondering if you can comment if there's been any changes in the competitive environment. And then my follow-up would just be back on Europe. I think I did with an earlier question did, which was back out the emerging markets numbers out of the international numbers, it does like Europe -- it does look like Europe was flat. You talked about growth in Diabetes Care and some of the others this year. Is that just a pharma systems issue or is there something else there that's in a state of decline?

No. It's pretty much pharma systems. And Gary, you want to comment any further on Europe?

Yes, just I had mentioned before, of the 8 country areas in Europe, 5 are growing quite nicely, 4 of them are growing above mid-single digits. And it's really the pharma systems impact in France and then a small decline in Italy and Spain given the economic conditions there. But I think low single digits is a good assumption for your growth.

It was 4 in the quarter when you pull all of those. Sara Michelmore - Brean Murray, Carret & Co., LLC, Research Division: Okay. That's helpful.

And Bill will talk to you about the environment. Now we would disagree. We don't have dominant positions. We've done a good job in the U.S. market, but I'll turn it over to Bill.

This is Bill. Just on the competitive environment, first of all on the infusion side, remember that we've got an array of Safety products, some of which are very new, which are launched in both the U.S. and in Europe. If you start in Europe, we did get accelerated capacity in place last year on the Venflon Pro Safety. That's the safety product for side port infusion. We're getting very, very solid growth there. We're also getting double-digit growth on our Nexiva platform worldwide. And we just launched just a few months ago, so it's too soon to talk much about the Insyte Autoguard with Blood Control, but we've got significant number of evaluations going on with that product. So we're comfortable that we're well positioned on the infusion side to compete, particularly in the developed markets. And our safety product also in China continues to grow at very high rates, well into double digits. So we think we're just fine in terms of competing in that category. We're also just starting to roll out our ReKindle product portfolio for the hypodermic side. That really doesn't complete its full array availability until we get into late second quarter or third quarter. That's more of a second-half factor. But anyhow, all those changes that I know we've talked to you about for a couple of years now starting to roll out. So we're probably a little more confident in our ability to compete around the world than we might have been even 1.5, 2 years ago.

Your next question comes from the line of Jeff Frelick with Canaccord.

A question for David with respect to Med/Surg. The challenges over the last 4 or 5 quarters with U.S. Med/Surg business and then you talked about maybe bumping up the low end of guidance for this year for the overall Med/Surg business, is that due to a change in the U.S. business or mainly some outperformance or improvement in o U.S.?

Just to clarify, the improvement in Med/Surg is globally, number one. Number two, the difficulty -- the recent difficulty that we had with Med/Surg is the pricing that we talked about. And Vince mentioned earlier one particular product in particular how that pricing pressure, which is impacting it in the last half of 2011, in the first half of 2012. So we will see improvement in U.S. as that tough comparison goes away. And then overall, we're seeing very good growth and increased confidence internationally on Med/Surg business and the fact, those 2 factors combined, is why we're bringing up the bottom end of the range on the Medical segment overall.

Our final question comes from the line of Robert Goldman with CL King. Robert M. Goldman - CL King & Associates, Inc.: Going back to the guidance and on the currency, it does look like since you had the Analyst Meeting that the dollar did appreciate relative to the euro by about 3%. And lowering earnings per share and sales guidance as you have seems quite logical unless you have, which I would imagine you do, some natural hedges and if you have any synthetic hedges, and I wonder if you would speak to that. And also is it sort of your intent every time the dollar does move up or down a couple, 3% relative to the euro to be changing your annual guidance on a quarterly basis?

First off, we don't have hedges anymore in relation to cash flows. Second, in relation to how we provide guidance, we've been pretty consistent over the years on how we look at guidance in relation to movements in currency as we talked about early. Euro is our biggest exposure to the currencies. As I said earlier, it's a little over $2 billion. So we provide guidance changes in those major currencies, we updated the reported numbers. So we do, do that on a quarterly basis. Robert M. Goldman - CL King & Associates, Inc.: And the natural hedge question?

Well, we have a natural hedge and what we said is about 25% of any impact on the top line flows through to the bottom line, so that gives you an idea of the natural hedge that we have.

Which we take into account when we make this change in guidance.

Yes, and recall we don't make any statements about where we think currencies are going to be. When we provide guidance, it's usually right around where the spot rates are. In November, the spot rate in the euro was around $1.38, and as we said earlier, we're at the high $1.20s when we pull together our guidance and where we think it's going to be for the remainder of the year.

All right. So listen I would like to thank all of you for your questions. I'd like to say that we're pleased with the start to the fiscal year. As I mentioned, we saw some strong growth in emerging markets, good safety growth. The product launches are on track and so are our operational excellence programs. We look forward to talking to you during the balance of the year. Thank you very, very much.

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time, and have a wonderful day.