Good day, ladies and gentlemen. Welcome to the Q1 2009 PerkinElmer Earnings Call. At this time all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Mr. Dave Francisco, Vice President of Investor Relations and Treasury. Please proceed.

Thank you, operator. Good afternoon and welcome to the PerkinElmer first quarter 2009 earnings conference call. I'm Dave Francisco, Vice President of Investor Relations and Treasurer for PerkinElmer. With me on the call today are Rob Friel, President and Chief Executive Officer and Mike Battles, Vice President and Interim Chief Financial Officer. If you've 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 at 1-877-PKI-NYSE. Please note this call is being webcast live and will be archived on our website until May 14, 2009. Before we begin we need to remind everyone of the Safe Harbor statements 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 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 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 that we use non-GAAP financial measures during this call that are not reconciled to GAAP in that attachment, we will provide reconciliations promptly. I'm now pleased to introduce the Chairman and Chief Executive Officer of PerkinElmer, Rob Friel.

Thank you, Dave. Good afternoon and I appreciate you joining us this afternoon for our first quarter 2009 earnings call. We are quite pleased with our financial performance in the first quarter. Despite difficult economic conditions revenue was flat organically and we were able to expand operating margins and generate very good cash flow. The first quarter of 2009 marked the first quarter that our operating structure was aligned according to human and environmental health. Our increased emphasis on these two attractive end markets coupled with our ability to provide a broad array of service offerings has allowed us to perform relatively well in the first quarter. In addition, we continue to make good progress on improving operational execution both in the factory and in our front-end organizations. Additionally, we expanded our portfolio of innovative products with significant product launches in the cellular analysis, newborn screening and the analytical sciences area. We also increased our commitment to advancing drug discovery and life sciences research in Asia with the inauguration of a Center of Excellence in Singapore. I'm also pleased to announce that we're strengthening our executive management team with the addition of Andy Wilson who will be joining us as our new Chief Financial Officer in mid-May. I'm very pleased that Andy is joining us. Andy is someone I have known since the mid '90s when we worked together at AlliedSignal. He brings some great financial experience starting out at KPMG and having worked at some very good companies like Pepsi, AlliedSignal, and Danaher. In addition he is experienced in business development and operations and most recently served as Corporate Vice President of Investor Relations. So brings a good breadth of experience including a strong knowledge of Wall Street. I'd also like to take this opportunity to publicly express my…

Thank you, Rob. Good afternoon, everyone. I will now provide more details on our Q1 financial performance and guidance for Q2 in 2009 before we open the call for questions. Before I get into the details, I want to clarify that whenever I talk about a particular measure being up or down, I'm referring to an increase or decrease in that measure during the first quarter of 2009 compared to the first quarter of 2008. To the extent that I use any non-GAAP measures those numbers have been reconciled to a comparable GAAP measure in the financial tables of the press release or posted on our website. As Rob discussed earlier, Q1 was another solid quarter of financial performance, particularly considering the difficult economic conditions. Revenue was down 6% as compared to the same period last year. The unfavorable impact of foreign exchange net of acquisitions was 6%. Therefore, revenue growth was flat versus the prior year excluding these items. The remaining revenue analysis is presented excluding the favorable impact of foreign exchange and the favorable impact of acquisitions. By segments, sales grew 3% for human health and declined 3% for environmental health. On a regional basis, the Americas grew low-single digits, Europe declined mid-single digits and Asia grew mid-single digits. Within Asia, we saw strong growth in China, India and Japan offset by continued pressure and key emerging territories where currencies remain weak. Regions across the globe experienced similar trends within their respective end markets where as Rob mentioned innovative technologies, reagents, consumables and lab services all performed relatively well offset by poor performance in a more capital intensive offerings. Also contributing to the growth in the quarter was the fact that due to our fiscal calendar every five years we have additional days in our fiscal year, which…

(Operator Instructions). Your first question will come from the line of Ross Muken with Deutsche Bank. Please proceed.

On the diagnostic assets, could you dig a little deeper on sort of some of the trends you have seen in that business, and if you could talk about what you have seen in sort of the reimbursed assets versus the non-reimbursed? Then in terms of on the cord blood side of things, it seems like that business is held in pretty well. I'm assuming it's sort of performing as you expected and in terms of as we exited the quarter is the same level of kind of demand holding up as we head into Q2 as we sort of saw and then it was sort of just a steady state?

Let me start off by talking about, I'd say the systems business, which is really sort of a newborn and prenatal screening and I think what we are seeing there is in the U.S., it is sort of flat because as I mentioned there is continued pressure on the U.S. State Labs and their budgets. We think there is maybe another quarter of that. I think I mentioned in December we were seeing some safety stock reductions and we think that's probably another quarter of that and we start to see growth in the back half, but clearly there is a slowdown in adding tests to the menu. But we continue to see good growth outside the U.S. whether it's in Europe or in the developing areas. So I would say in those cases it is not so much a function of reimburse versus non-reimburse. It's really more of a function of geography. So from that perspective, I think those business will do well in the back half. With regard to the cord blood, I think there is two things that's going on there. It seems to be fairly recession resilient up to this point and I think it really speaks to the lack of penetration or the fact that it's penetrated probably in the higher sort of economic arenas. The other thing that is happening is I think we are doing a better job of understanding the fact that we can market cord blood as part of a much larger enterprise. If you look at really the buying factors that people consider when they are going to store blood for let's say 18 or 20 years, one of the major factors they look at is the financial viability of the people they are storing the blood with. I'd say fortunately when you look at our competitors or you look at other people that are offering cord blood, they've the tendency of being small companies, in most cases private companies and not very well-financially capitalized. I think we have done a nice job recently of pointing that out and taking advantage of the significant financial strength that PerkinElmer has and consequently I believe we are taking share.

On the service piece, it seems like there's a lot more interest there across the board, as people have been delaying purchases, they're more, I guess, aware of keeping the existing boxes whether your own or not your own kind of working at tip-top shape. Can you characterize the effect of the delayed purchasing versus share gain in terms of the impressive growth in that business?

I think that's a piece of it. But although I have to say when we don't sell as much instruments, or when we don't sell as much boxes there is a potential negative impact from the service organization because when we sell an instrument we do get some follow-ons revenue in our service organization, whether it's training or validation from that perspective. So there is a little bit of a negative impact on the service organization when we don't sell instruments. But having said that I think your theory is correct, as people hold on and stretch out purchases of new equipment. They're spending more on service. I think the other thing that's happening as people come under pressure from a productivity perspective. They really look at service as an opportunity to reduce their costs inside the lab and really focus their expenditures now on things that can help them develop new products.

Lastly on the guidance. You guys had a really nice quarter here. You kept the guidance. I know the end market environment is still a little bit challenging, but given the fact that the 2Q guidance quarter-over-quarter at least from an EPS perspective looks to be flat. What are you seeing or which specific businesses are you most intently focused on that kind of keep you reserved? Obviously industrial is an obvious one, but aside from industrial to keep you a bit more reserved from being a bit more aggressive on the guidance.

I'd say we think about our markets and we alluded to that. I think genetic screening is stable, continues to do well. I think bio-discovery is probably stabilizing and may be provides a little bit of an upside depending on the funding of the stimulus packages. I think service continues to do well. I'd say that one that probably concerns me most of all is medical imaging, and I think we thought that was going to be sort of flattish in the first half, may be a little bit of pickup in the back half, and I think I continue to be concerned about the recovery of that business fundamentally being driven by the lack of financing and also the continued pressure on hospital budgets. So I would say that's the one that I'm sort of most concerned about.

Your next question comes from the line of Isaac Ro with Leerink Swann. Please proceed.

On the environmental testing market, could you give us a sense of any new regulations that you're seeing that may be incremental this year or maybe perhaps next year as related to the stimulus package? Just trying to figure out how the regulatory environment is working in your favor.

There was a new regulation that was passed. I think it was February 10th that increases the testing requirements on consumer products. It was passed in the United States, and so we are seeing some benefit from that. With regard to the stimulus, I think there are a number of things both in whether it's U.S. I think it is $13 billion going after sort of energy efficiency, some $94 billion on environmental, some $32 billion going into materials and food in addition to the some $120 billion that's going into health care. So I think there are a number of things in the U.S. where we think we can probably see some benefit for. Then a number of the other areas, China has got a fair amount of money going into health care, energy efficiency, and infrastructure improvements as well as a number of the European countries. So I think there are a number of opportunities there for us. I think the real question is whether it is a 2009 benefit or whether it's a 2010 benefit.

If it is later this year or early next when you see the first real pickup?

I think in some areas we will see probably in the fourth quarter, I think probably in our cellular imaging area where we seem to be getting a fair amount of traction at least some of the grants that have been written. So if that funding comes out early fourth quarter, we could see some benefit. I would say we haven't factored any of that in our forecasts or in our guidance. So I think that would be an upside.

Then just lastly, I think, last couple of quarters, there has been talk about the genetic screening business in the U.S. having some pressure due to state dollars being held up, has that changed at all in the last 90 days? And how does it look going forward?

I think we are still flat in the first quarter, and as I mentioned previously I think it probably goes another quarter and then I think probably in the back half. We start to see some opportunities to grow again in the U.S., but having said that we continue to see pretty good growth outside in Europe and the developing areas.

Your next question comes from the line of Derik De Bruin with UBS. Please proceed.

We've heard a lot about inventory to stocking from some companies and could you just walk us to what exactly you're seeing and what's going on and more importantly do you think the current economic experience that we are seeing right now will prompt a fundamental change in the way the customers manage inventories going forward?

I would say the area where we saw the destocking was really more in the genetic screening area. Depending on the lab, they would probably keep 60 to 90 day supply of reagents. That's probably the area we saw. We started to see it in 2008. I'd say late third quarter, early fourth quarter of 2008. As I mentioned I think probably come middle to end of second quarter, we'll start to see that bottom out. Other than that in other areas, we really haven't seen that phenomenon from the standpoint of a stocking problem. Keep in mind some of our reagents on the bio-discovery side are radioactive or radiochemical. The shelf life is not that long. We've got that benefit. So I would say other than in the genetics screening area, we haven't seen a significant impact from destocking.

What about the second portion of it? It's just a matter of people working for inventories, I'm just wondering if this (inaudible)?

I think it depends if they can be successful with holding lower safety stock in this environment I think maybe they go up a little bit more but we probably won't return to the levels of safety stock that we were previously. I think if you look at previous recessions in other industries that occurs when people are able to manage their inventory down to a level and they don't lose [phil] rate or they're able to maintain their operations. I don't think we will see go back up, may be a little bit, but I don't think we'll go back to the levels that they had prior to the downturn.

The gross margin expansion was impressive particularly since you launched a record number of new products with [ViaCord]. Can you just give us a little bit more color into that? I know some of you said it was mixed, but just how sustainable this is going forward?

Well, I think the new product side of thing is fairly sustainable. I think we're seeing good traction in a number of the new products that are out there and as you mentioned one of the goals with the new products is not only to get new features, but also to improve the gross margin on that. So I think that's repeatable. I think the margin makes it really depend on going forward. One of the benefits we saw this quarter is the fact that our service and reagent business was very strong and the instruments were down. If you look at our split, service grew, our reagents and consumables grew, and our instruments were down. I think that's driving a lot of the mix. Hopefully going forward that won't always be the case. I mean, hopefully we will get some continued growth on the instrument side. So I would say I think on the new products it is repeatable. I think on the reagent and instrument mix, I don't know that we will have a growth differentiation going forward as we had this quarter.

What were the instruments down in terms of organically?

The instruments were down about 7%.

And finally, on your discontinued operations is there any update on your plans of it?

No plans. I mean, the books have been out for another couple weeks now. We have got a fair amount of people interested. We just started discussions about value and due diligence. So I think that continues to go on as planned.

(Operator Instructions) Your next question comes from the line of Quintin Lai with Robert W. Baird. Please proceed.

This is actually [Justin] for Quintin. What was the FX in the quarter?

The FX from a revenue perspective?

From topline?

7% FX and 1% helped from acquisitions.

Is that evenly split between environmental and human health or is it more weighted on one side?

It is more weighted on the environmental side.

You said you purchased about a million shares, what was the average repurchase price for that?

$14 a share.

One last question, you said that you saw research stabilizing. What are you seeing exactly that made you think that it's stabilizing? Are you looking at stimulus in the back half of the year or are you starting to see cord activity on a more normal basis?

I would say it is more of the latter. I would say what we are seeing from our customers is a stabilization of order patterns. I think we mentioned this in our last call. I think when you look at the pharmaceutical industry they have been going through a fairly difficult time for some time with whether it is generics or drugs coming off patents. Our belief is they have adjusted their spend rate almost irrespective of what's happened from an economic perspective. So we are actually seeing some stabilization, both on the instrument as well as the reagent side in bio-discovery.

That's very helpful. Then one last question, you noted that the U.S. was up organically but Europe was down which is kind of counter to lot of what your competitors have said. Can you provide a little more color on that?

I think part of that's being driven by our medical imaging business, which was down fairly significantly and a lot of that goes into Europe. When we talk about Europe, we include Eastern Europe. Eastern Europe was down quite significantly I think largely because of the FX things that Mike talked about in the emerging territories. Their currency has been devalued quite significantly.

There are no further questions in queue. I'd now like to turn the call back over to management for any closing remarks.

Going forward, we will continue to manage the current economic environment through a dedicated focus on cash flow, driving service, consumables and reagents revenue, and containing non-customer related costs, while continuing our investment in high-growth areas, innovations, collaborations and employee development. As experienced in the first quarter, I believe that this is a balanced approach, which will provide us with a strong foundation to maintain our market leading position now, grow when the economy recovers and become an even greater contributor through improving the health and safety of people in the environment. This concludes today's call. Thank you for joining us. Have a great day.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.