Hello, and welcome to BD's Second Fiscal Quarter 2011 Earnings Call. At the request of BD, today's call is being recorded. It will be available for replay through Wednesday, May 4, 2011, on the Investors page of the bd.com website or by phone at (800) 642-1687 for domestic calls and area code (706) 645-9291 for international calls, using conference ID 59468691. [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 second fiscal quarter results. As we referenced in our press release, we are presenting a set of slides to accompany our remarks on this call. The slide 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 second 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, President and Chief Operating Officer. Also joining us are David Elkins, Executive Vice President and Chief Financial Officer; BD Executive Vice Presidents, Gary Cohen and Bill Kozy; as well as Bill Rhodes, President of BD Biosciences; and Tom Polen, President of Diagnostic Systems. It is now my pleasure to turn the call over to Vince.

Thank you, Monique, and good morning, everyone. Before we discuss the results in the quarter, we would like to provide you with an update on the situation in Japan subsequent to the earthquake and tsunami. We are pleased to report that our business operations in Japan have stabilized more rapidly than we originally anticipated following the earthquake. Quarter volumes have returned to normal levels and customer service and distribution operations are now also operating at normal levels. BD's manufacturing plant in Fukushima Province sustained some minor earthquake-related damage, but has recently restarted the production of prepared plated media. We expect the manufacturing of the BD Hypak prefillable syringes to resume during the third fiscal quarter. We also have a distribution center in Fukushima, which is now fully operational and immediately following the earthquake, we established an additional distribution center near Tokyo, which is supplementing normal distribution operations in Japan. Our plant and distribution center in Fukushima Province are located approximately 60 kilometers from the damaged nuclear plant facility. And because of this, we contracted with a company specializing in radiation testing to assess our facility. The test results today indicate that radiation levels in our Fukushima facilities are essentially normal and do not pose any reason for concern. Testing will continue over the coming weeks, and we will continue to closely monitor the situation at the nuclear power plant. Overall, we are very pleased with the speed of the company's recovery in Japan, which is a testament to the hard work and dedication of our employees. Most importantly, we are thankful that all of our employees and their families are safe. From a financial perspective, we did see an impact on our revenue growth from the earthquake in Japan. In our second fiscal quarter, the impact to our sales growth…

Thank you, Vince, and good morning, everyone. I'd like to begin by discussing the key financial highlights for the second quarter. As Vince stated, we are really pleased with our results. Revenue growth was 4.6%. We experienced solid growth in the Medical and Diagnostics segments. Strong growth in Biosciences segment was masked by supplemental and stimulus spending in fiscal year 2010 and the impact of the earthquake in Japan this year. We saw continued strength in emerging markets, which grew at about 13% currency neutral. We continue to control G&A expenses while investing in emerging markets as well as R&D, which increased almost 19% in the quarter. This is in line with our expectation as we continue to invest in new products and platforms. The company's earnings of $1.38 benefited from favorable currency of about $0.07 in the quarter. Additionally, during the second quarter, we completed $221 million of our $1.5 billion share repurchase plan. Our guidance for the program in 2011 remains unchanged at $1.5 billion with $1.1 billion repurchased in the first half of the year. Turning to Slide 9 and our revenues by segment. I'll start with the total company performance. As I mentioned earlier, revenue increased about 4.6% currency neutral. This includes less than 1 percentage point of unfavorable pricing. For the first half, the company grew 1.5% currency neutral. Excluding the impact of sales related to the H1N1 flu pandemic and the stimulus and supplemental spending in fiscal year 2010, the company grew at about 5% currency neutral. BD Medical's second quarter revenues increased about 5% currency neutral. Growth was primarily driven by Diabetes Care, which continued strong sales of pen needles fueled by Nano. Medical segment revenues were also driven by strong growth in our Pharmaceutical Systems business and international safety sales. For the…

Thank you, David. On Slide 21, I'd like to provide an update of our key product initiatives, starting with BD Medical. We recently launched ecoFinity, a sustainable disposable solution for sharps products. Our ReKindle program remains on track with conventional reuse prevention and low cost safety products launching at 3 plants on 3 continents this year. In addition to ecoFinity and ReKindle, we are also planning to launch an extension to our flagship product, Insyte Autoguard, with a blood control feature and Nexiva with a diffusion tip in fiscal year 2011, further enhancing our portfolio of innovated fusion therapy products. Within our Diabetes Care business, we plan to launch a next-generation safety pen needle during the back half of this fiscal year and other innovative products beginning in our fiscal year 2012. As I have mentioned in past discussions, we continue to collaborate with the Juvenile Diabetes Research Foundation, and we will be leveraging our expertise as a leader in insulin delivery and acute-care infusion to launch new products that will improve the patient experience and therapy outcomes for insulin pump users. Turning to Slide 22. I'd like to walk through some of the key initiatives in our Diagnostics segment. We are continuing to invest in the BD Viper XTR with fully automated specimen processing. We recently launched our HSV assay on this platform. In the third quarter of this fiscal year, we will be launching a new automated microbiology plate streaker called the BD Innova. We're also excited about the BD MAX, our new automated molecular diagnostic instrument. We're pleased with the product or aggressive of the new 6-color MAX. It's performing well, and we're on track to launch that as an open system next month. In fiscal year 2012, you can expect the launch of the BD MAX…

[Operator Instructions] Our first question is coming from Kristen Stewart of Deutsche Bank.

Thanks for taking the question. I was just wondering if you can maybe expand a little bit more on your commentary on Western Europe. It seems that, that's along with Japan one of the things bringing down the constant currency revenue growth this year. I'm just curious if this is something that you would expect to see some significant level of improvement as you move forward especially with the safety initiatives looking out the next couple of years and whether or not new revised expectations for this year with constant currency growth really changes the way in which you've looked at the next three years, which as I recall was kind of on average 6%. So obviously, you'd have to have greater acceleration in the outer years in order to achieve that.

Talking about Western Europe, let's focus on this year. Western Europe, the issue in Western Europe is really one of utilization and some rationing of healthcare by the government in Western Europe. And it's not the same across all of the countries. Some countries are more severe than others. But we expect well, Western Europe grew about 1 to 2 percentage points in the first half of the year, and we expect it to be around 2% for the total year. So it's kind of a consistent trend we see in the last 2 quarters. Our expectations were a little higher for Western Europe going into this year, but we see the situation as stable. We are seeing progress in safety and in fact, safety grew 7% in Western Europe. As we also mentioned on the call, we're seeing higher safety growth in emerging markets, and Gary can comment on that. Biosciences had a good quarter as well in Europe. So we're lighter than we thought in Western Europe, primarily due to the environmental factors. We expect to get a little bit better in the second half of the year. In terms of the longer-term guidance, we're in the middle of our strategic planning process. So I'm not going to get into what we see in the out years right now. I would rather give you an all-in answer based on our latest strategic planning, which has started but will continue for the next couple of months and come back to that with a more informed answer. But let me ask Gary to just comment on safety for a minute.

Yes. And maybe also, I'll add a little more color on Western Europe because we thought there would be some questions about it. And probably it's not any surprise to anyone that economic environment in Western Europe is constrained relative to other areas of the world. And we grew around 2.5% in the quarter in Western Europe, and we're projecting to grow a little under 2% for the balance of the year. There's not much of a pandemic or stimulus impact there. So that's pretty much the same FX neutral or adjusted. So more or less, our outlook for the rest of the year in Western Europe relative to the quarter is similar or slightly more conservative than what we had in the quarter. When you look by country in Western Europe, it's really concentrated just in a few countries. France is one of them, and that has been impacted more by Pharm Systems [Pharmaceutical Systems] because all of our Pharm System sales in Western Europe are recorded in France because that's where we ship from, and not because of the headquarters of the global Pharm Systems business. In Greece, our sales this year are down by half because we made a delivery decision to go from a direct to a distributor distribution model to reduce collection risks in Greece. So that was a delivery decision anticipated from the start of the year. And in Nordic, our sales are a little bit light. But the other countries in Western Europe were growing at a low to mid-single digit rate, which is pretty much what we would expect given the economic environment there. And as Vince mentioned, safety sales are growing about 7% they did in the second quarter. That's pretty much our outlook for the rest of the year in Western Europe, and that's quite a bit above the underlying base growth rates, so we are getting good contribution from safety. And then the other side of the international story is that emerging markets are growing really solid. As Vince mentioned, we had about 13% growth in the second quarter. That's pretty consistent with our outlook for the year in emerging markets, and we're getting very strong safety growth. As have been mentioned during the formal comments, emerging markets safety in total is basically going to be around the same level as Western European safety for the year in absolute dollar terms, and we're expecting mid-20% growth over the balance of the year. So essentially what we're seeing is an economic impact in Western Europe, which is being more than offset by this strong growth we're getting in emerging markets, reflecting the diversity of our sales around the world.

So we just agree [ph] to the forecast a little bit on the back half of the year in Europe. So thank you very much.

And then just real quickly I guess for David just on the higher resin costs. Obviously, it takes a little bit to see the impact of higher oil and resin flow through the P&L. You guys did not give an update on ReLoCo savings or whatnot. But how can we think about higher resin costs going forward? Is there an ability to maybe see some acceleration of some of the cost savings with programs like ReLoCo and EVEREST that could possibly help to offset higher resin if we continue to see oil where it's at today?

Yes. I mean, that's exactly what we're doing. I think that we had some headwinds of about 30 to 40 basis points on resins. We'd also had some headwinds of about 20 basis points from the pension. And actually, ReLoCo year-over-year is favorable. So the reason why it's only about 30 basis points from a performance perspective, as I was talking about, we do have some -- the operational efficiencies are starting to deliver, as well as the favorable comps that we had. So we're really excited about the underlying operation efficiency programs, and they are helping to offset the higher resins cost. From a guidance perspective, we're looking at resins. As we said, it's about 3 months before that comes through. So we have a pretty good view of where resins will be for the remainder of the year. And we're assuming that oil will be slightly over $100 a barrel for the remainder of the year.

Phil, would you like to remind us about the projected savings from the ReLoCo and the schedule?

Sure. The ReLoCo program remains on track with the previously discussed commitments that we made expected to start delivering very positive impact in FY '12. Additionally, ReLoCo 2 is underway in the business, and that will be kick started by a focus on revisit globally of all of our procurement activity. As you would expect, everything from base raw materials to our supply chain activities. So to your question about next steps designed to offset some of this challenge ahead, we're underway with that planning, and we're probably about 6 to 9 months away from any detailed discussion about that.

On ReLoCo 2.

ReLoCo 2 is new as far as I can remember. Is that the first time you're mentioning it?

That's the first time we're mentioning it. You're right.

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

I wanted to ask you a couple of questions on the Diagnostics business. Can you give us a little bit more detail on molecular testing performance and also comment about the strong overseas performance of Diagnostics systems? I think that was up 11% constant currency.

Sure, we'd be happy to do that. I'm going to ask Tom Polen to comment.

Amit, this is Tom Polen. So in molecular, I'd really break that into 2 areas. Our GeneOhm business, we saw a very strong growth both internationally and in the U.S. As Vince had mentioned, we're up 22% for the quarter in GeneOhm, driven both by double-digit growth in both MRSA and Cdiff testing there. Our GC/CT Molecular business, the Viper and the ProbeTec was up 4.5% globally driven by solid performance primarily in the U.S. As we think about internationally, certainly we saw particularly as Gary had reflected in Safety, we saw very, very strong growth in the developing markets, in the Diagnostic Systems business, particularly in our TriPath women's health business, as well as in our infectious disease core Microbiology business.

And can you comment also about just what you're seeing out there? And discretionary patient testing volumes, are you seeing a pickup that's are starting to take place that's reflected in these growth rates?

We're not seeing any specific increase in overall patient test volumes, but I would say we are seeing an increase in some sub segments of testing volume such as screening for MRSA and Cdiff. We see that segment of the market continuing to grow, particularly as it converts from traditional methods over to molecular diagnostic methods.

Tom, do you want to comment maybe on the U.S. market from the standpoint of overall testing and then women's health?

So from a -- overall, both the diagnostic systems and the PAS business, we see overall lab testing volumes relatively flat year-on-year, in the second quarter and...

Overall OB/GYN business maybe off a little bit better than they were before.

So women's health, we specifically track OB/GYN and overall Pap volumes. We see those in the U.S. down about 4%. We saw our U.S. TriPath business consumables were down about 2% for the quarter driven by that overall trend. And that overall trend of 4% down on overall Pap testing is really driven by a change that was made last year in the recommended testing intervals for women for Pap testing. And as I mentioned earlier, internationally, we see very strong double-digit growth for cervical cancer screening, particularly in the developing markets. And that's bringing overall TriPath globally to about 5.5% for the quarter.

Your next question comes from the line of Rick Wise with Leerink Swann.

Let me start with the guidance, if I could. Obviously, appreciate currency helped but really the underlying business basically did pretty well in the quarter, a little better on almost every front than we expected. Second, the easier comps. It sounds like Japan has resolved listening to you. ReLoCo is kicking in. I still am not quite sure I understand why the extra incremental conservatism. If I view it as just a very conservative stance given all the moving pieces?

I'll let David comment on that.

Yes, there's just a couple of things. If you think about it from an EPS perspective, the underlying performance is up about $0.05. What we're happening to absorb on the bottom line is Japan's about $0.05 for the full year, as well as resins being about another $0.05. So that's around $0.10 that we're absorbing. And remember, through our operational efficiency programs, we're able to offset the lowering of the top line guidance because the operational efficiency gains were actually getting into business. So to really just summarize for the full year from a guidance perspective, we're really incorporating impacts of Japan and the higher resin costs. And that's why the underlying EPS is around the bottom end of the range around 10%.

Yes. Maybe on a sort of strategic basis, Vince. You guys are doing a great job operating efficiency. It seems like there's a lot in the pipeline, but there's still sort of a long-term growth challenge, not just for Becton but for all companies. Do think that Becton needs to be even more aggressive on the acquisition front and/or even more aggressive in stepping up R&D to meet that challenge?

So I don't think we have to be more aggressive in stepping up R&D. I think we're making excellent progress on our R&D programs, and I think you will see in the short run that moderation of the spending and it will come in at about 10%. And we'll continue to aggressively fund R&D as I look forward, but in line with the step ups that we've been doing. On the acquisition side, our acquisition strategy hasn't really changed. We're still looking for things that are strategically complementary to where we are today generally plug-in acquisitions. We're being very systematic. We're looking at all three of our businesses areas for new opportunities, and I think we're developing an increasing business development capability. So it's something from a capability standpoint, we will be working on over the next couple of years, and acquisitions will continue to be part of our strategies as we move forward.

Okay. Let me make one more. If you looked at the next couple of quarters, I appreciate the concerns that you highlighted, David, but what could go right? If we're talking after the next quarter and after the fourth fiscal quarter and if you would do -- Becton would perform better, where would that come from? Would it be -- is it rolling at the products? Is that the cost reduction? Is there something specific that we could think about?

I think the two things we're most excited about, as Vince highlighted, are the new product launches that we have. I mean the underlying performance the Biosciences business has been phenomenal and with the number of launches that we have going there, the BD MAX platform and the opportunities we see from expanding the menu there is very exciting for us. And as we talked about with the emerging markets as Gary highlighted, as well as Bill Kozy highlighted for the Medical business, I'd say that those are some of the areas that we're very, very excited about. And then lastly, as Vince talked about on the last call, it's our operational efficiencies, our ability to get these shared services centers up and running to takeout overhead costs so that we can continue invest in these new opportunities. It's what's enabling us to move forward and why we're excited about business.

Yes, I'd be specific, Rick. I would just add on the emerging markets side. For us it's not just China, which is doing very, very well or India, which is doing well, but Latin America is going well and we see other parts of Asia now as opportunities. So I think you're going to see us as we look out continuing to invest in those markets and building capabilities, and I think that provides a platform for upside.

Your next question comes from the line of Mike Weinstein with JPMorgan. Kimberly Gailun - JP Morgan Chase & Co: It's actually Kim in for Mike. So my first question is on the U.S. side of the business. I don't think that you commented broadly on the health of your U.S. markets and utilization trends in the quarter. You did indicate that pricing was off just under 1% worldwide, and I'd be curious if you break that out U.S. o U.S. and whether that's changed at all over the last couple of quarters.

So I can't break it out, but there's not big differences between the U.S. and the other developed markets. In terms of utilization in the United States, we're indicating pretty much a stable situation. On the lab testing side, we really haven't seen much of a change. I think Tom commented that the lab volumes were around 1% up somewhere there for general testing, and that's where they have been from our perspective. We haven't seen much change in doctors’ visits or anything, so we're really looking at a pretty much a stable business. In the U.S., we had good Diabetes Care performance. We had good Pharm Systems performance, which helped our Medical business and Diagnostics. Our Infectious Disease business did well. You might recall that last year was a very light flu season. We had a bit of a flu season this year. So a little bit of a tailwind there. But as we mentioned that TriPath was a little soft because the intervals but GenOhm did very, very well. And then lastly, Biosciences and maybe I'll ask Bill Rhodes to comment on Biosciences in the U.S. because I think they have an excellent quarter.

Thanks, Vince. Kim, this is Bill Rhodes. Yes, we had a good performance in the U.S. In terms of utilization, we saw our clinical reagent sales do quite well. And of course, the bulk of our products through Cell Analysis are in the research markets and doing quite well with that. So the opportunity last quarter and the opportunity going forward in the U.S. frankly is continues to be and is quite good. Kimberly Gailun - JP Morgan Chase & Co: Okay, great. And just a quick follow-up, you had a number of areas outperform relative to our expectations in the quarter. You put up nearly 7% organic growth after we adjust for the items in the quarter, which is well above the outlook for the year. So I'd just be curious if there were any specific onetime orders that might have helped in any of the business segments in the quarter.

I'll have Bill Kozy comment because in Medical, Pharm Systems continues to be lumpy and it was a strong quarter. But Bill, maybe you want to comment?

Sure, let me. This is Bill Kozy. In terms of the onetime sales impact related to global Pharm Systems, we had about $7.5 million of some onetime sales events. It's a combination of some inventory replenishment and some validation testing and clearing back order, a bunch of miscellaneous topics. But clearly about $7.5 million that won't repeat.

So that's pretty much it.

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

This is actually James in for David. My first question is a follow-up on the increased pressure you're seeing in Europe. Could you try to break down how much of this is related to volume and how much might be the price? And then specifically last quarter, you mentioned that you're seeing some slight escalation in pricing pressure in pockets of different world markets. I wonder if you could comment on how that's developed?

Well, we said that pricing is less than 1% for the company. And the way you think about that is that in some of the more mature product lines and you'll see it more on the device side, you're going to see more pressure because you've got more and more competition. And you see that in Europe with its tender system, but you also see some of that in the United States as well. Where we have differentiated products, and I'll give an example, like the launch of the Nano Pen Needle, where we had some great clinical data. The customer feedback is fantastic, you can actually go out on a premium. So that's kind of the breakout Biosciences with the new technology we tend to see less theirs as well.

So it sounds like on the pricing front, not a big change relative to last quarter.

It's not a big change.

Okay. And then secondly, just on R&D spend from a long-term perspective. Obviously, 2011 is an investment year. But if we look at where spending is going to end up this year, it's probably going to sit slightly over 6% of sales, which is certainly a step higher than it's been historically. Over the long term, do you think that this is the appropriate level of investment or could we see some moderation in the future as project timing starts to be a little bit less intense?

I don't see us going back below 6% of revenue. Again, we did have some big clinical trials. But I would also expect as some of the things come through the pipeline some of the longer-term things that we're working on, we're going to see some significant clinical trials for those as well. So I think if you use 6% around that number or maybe a little tiny bit above that, you'd be in good shape.

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

I wanted to go back to a comment you made in our prepared remarks regarding TriPath outside the United States being a source of growth in Diagnostics systems. Could you expand a little bit more on what the key drivers are there whether you've entered new markets, what you're seeing from a marketer perspective and any change on the reimbursement front that might have contributed to the strength in the quarter?

Sure. Tom Polen will take that.

Dave, this is Tom Polen. So I'd say specifically what we're seeing is in many of particularly the developing markets, what we're seeing is a transition from traditional Pap testing to the liquid-based cytology technology, which of course, is what we offer in TriPath. And we certainly are investing from a channel and market development perspective to help drive that growth. So it's primarily a technology shift through an improved method for doing cervical cancer screening. I'd say the other thing that we also see is particularly in areas of Asia-Pacific, to a lesser extent, in Europe and Latin America, increasing focus of maybe the government on expanding the screening programs for women to help improve the early diagnosis of cervical cancer.

And I just want to add a point to that, that cervical cancer is the leading cause of death among young women in many developing and emerging countries. And the way you saw the world respond to HIV in particular a decade or little more than a decade ago, we're starting to see some building momentum towards dealing with this particular source of mortality among young women in developing/emerging countries, which complements what Tom had indicated. And we're well prepared based on our experiences working with international organizations on dealing with infectious and non-communicable diseases on what business models are most appropriate to be able to address such needs and opportunities. So we're really at the beginning of that. Tom?

I'd just add one of the governments that is really leading in that, that's forefront very aggressively expanding cervical cancer screening is Japan. And we see very strong performance there in that market.

And Tom, in some of your comments regarding the investment for market development and education, from a competitive perspective is that something that you see BD leading the charge on? And how is your performance from a share perspective been in those markets when you compare it to some of the more developed markets like United States?

Certainly, in several of those markets, Japan being a good example, we do see ourselves taking a lead in helping to develop those markets. And we are, from a category position perspective, we certainly see that we're gaining, gaining ground in the developing world.

And in general, this is Gary again. From the standpoint of focus and experience, that educational element, the collaborative element of working with government's international agencies we're deeply experienced in those areas. It's a particular area of sense of purpose for the company to collaborate on addressing to help the needs of the society, not just to try to push product or technology into the country. And we've been doing that for over a decade in the infectious disease area and those same type of principles are being applied to non-communicable diseases, which also aligns the trends that are happening globally. The UN's got a major summit on non-communicable diseases in September. These are all areas we're involved with as a trusted partner.

Okay. And I know you sort of touched on Europe a number of times from a revenue perspective, but maybe you could sort of talk about anything you're doing on the cost side. Well, I understand that Europe represents a relatively large percentage of revenue. That, obviously, is a relative contribution. It's going to go down if the emerging markets grow faster and you start to penetrate some of these opportunities more fully. How are you thinking about Europe from a cost perspective? And at what point do you start thinking about running that business more for cash rather than growth?

Well, I don't think we're going to think about it running it for cash. We think we have growth opportunities. And as new things come to our pipeline, we think they're not just U.S. opportunities or emerging market opportunities. We think we're going to have opportunities in Europe with them as well. Gary has been very proactive in addressing some of these issues. Even as we were entering into this year. We reorganized Europe and changed the organizational model and took some costs out. But at the same time, knowing some of these things that we're working on such as the women's health and cancer, we're investing in some policy work. We still think that there's an opportunity for safety in Europe even though we're talking a lot about how fast the emerging market piece is picking up, and all of that's true. But to grow in Europe and increase the growth rate as we come out with the GenOhm products, which you're starting to get traction. It's not just the product it's the market development efforts. So it's not just the cost basis in Europe, which as I said we are attacking, it's also some market development efforts.

Your next question comes from Larry Keusch with Morgan Keegan. Lawrence Keusch - Morgan Keegan & Company, Inc.: David, on the hedging program for the company. Obviously, the weak dollar's been a benefit and as you mentioned, you picked up roughly $0.07 in EPS from the FX benefit this quarter. But given what the dollar has done, I'm just wondering if you have any sort of thoughts as you think about 2012 and perhaps, directionally the dollar going the other way what you might think about your hedging program?

Well, Larry, I think the first thing is we continue to see, as you know, significant volatility in the currencies. And just the change in the currencies from Q1 to this quarter's pretty significant. I think the notable thing this quarter about the dollar's weakness is really wasn't the euro that was driving the currency improvement. It was a lot of the other currencies, particularly Japan, Brazil, Australia and Canada. So it's those other currencies that we have exposure to. I think it's the dollar's weakness versus those currencies that really had driven it. As far as any longer-term comment, I think it's anyone's guess, there's a lot of moving variables, particularly see what Bernanke says later today. But I think there's too many variables to make any kind of comment right now on where we think exchange rates are going to go longer term. Lawrence Keusch - Morgan Keegan & Company, Inc.: Okay, perfect. And then just a question on GenOhm. Obviously, you mentioned multiple times it did very well, and there was specific comments about MRSA and Cdiff. I'm just wondering, is there something different that you're seeing out in the market? Could you point to because we've had all these deferrals in patient procedures that perhaps patients are sicker and more susceptible to somebody's HAIs as they come into the hospitals saying that's prompting more testing. Just any color as to what's going on above and beyond. Obviously, you mentioned the market development activities.

Tom, you'd like to think that?

This is Tom Polen. So I'd say we certainly continue to see hospitals and states recognize that MRSA and Cdiff are significant issues. And particularly, I'd say more recently we're seeing growing Cdiff is growing at a faster rate than MRSA. That's really been on the radar of healthcare practitioners. I'd say it from a broader macro market trends and what we see happening already and look forward to seeing in the future is. But at this point, we do see 11 states have already passed comprehensive HAI prevention laws, including mandates for targeted screening. We've got another 31 states that mandate HAI reporting, and there's at least 5 states that are in active discussion to mandate screening. The other thing that you may have seen, which isn't impacting essentially the quarter but we see it as a positive sign moving forward is earlier this week, CMS did come out and recommend to implement pay for reporting metrics in 2015 for MRSA and Cdiff. And that recommendation is part of the federal pay for reporting and value-based purchasing program. We certainly think this recommended performance incentives for hospitals to reduce HAI is a very positive move. And should that proposal be accepted, we expect that hospitals will need to scale up for MRSA and Cdiff reporting in 2013. So of course, we also see us well-timed with the launch of our MAX platform.

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

Thanks for taking the questions. Could you maybe just give me a quick -- I'm not sure if I missed it. I'm sorry if I did, lots going on. But the updates on the top line and the bottom line guidance, could you give an outlook for kind of what you expect for gross margins given the changes around FX and organic growth rates?

No, we didn't but I'll be happy to provide that. For the full year, we're anticipating our gross margins to be at the bottom end of our guided range, it's about 52.2%. And really, currency will be neutral for the full year. And performance will be slightly positive about 30 basis points. So that takes us from about 51.9% last year to 52% to this year. True, underlying performance is increasing about 70 basis points. We also have favorable comparisons because of the improvements we're making on the ReLoCo program, and that's being muted a bit by the resin and pension as well as Japan is hurting our margins. So the key takeaway there is the underlying performance is actually doing really, really well. And it's some of these one-off things that are muting at this year and that's where we're getting the 30 basis point improvement year-over-year.

Okay, perfect. Thanks for the clarification. And then just one more kind of on guidance. From a cash flow standpoint, any exchanges in that range? Is there any change on your cash flow guidance?

No, cash flow remains strong and we're holding our $1.9 billion for the full year from a guidance perspective. So cash flow is right in line with our expectations.

And then if I could just one markets with some quick guidance questions. Was there any market share shifts in STDs? I know you said that grew some, I know oftentimes there are certain contract wins in certain geographies, et cetera. Anything like that going on in this particular quarter?

Oh, I'll ask Tom to comment on it.

This is Tom Polen. So no share shifts on a global basis in STD testing, no.

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

I have a couple of questions on the Biosciences outlook. One, I'm wondering it was helpful to get the growth that you're expecting from the acquisition, but I'm wondering if you can talk a little bit bigger picture about what you think the bench top flow market opportunity might be. How big of a market is that and sort of what are the competitive dynamics in that market today? And then two, if you could provide any color on the potential for the other new products that you're launching in Biosciences such as the desk tops order and the research analyzer.

Sure, Bill. I'll ask Bill Rhodes to comment on those things.

Bill, and it's Bill Rhodes. Glad you asked. The personal Flow Cytometry space, the best way to put color around it in terms of market opportunity is really to talk about we're developing the market. Accuri was a leader in that. So the way we look at it is how many people around the world and how many laboratories can we move that technology into? And as Vince said in the introduction, there are hundreds of thousands of people and laboratories around the world. So we see that as great opportunity. It makes Flow Cytometry affordable. It's a powerful tool. There are 70,000 or so life sciences researchers now who are accessing core laboratories in order to do that type of work, who now have an opportunity to do that within their own labs, and then there are hundreds of thousands of others. So we obviously see this as a very substantial market that we're developing around the world. And it also makes it affordable for emerging markets where Flow Cytometry can be used but has not before been affordable. In terms of the desk top sorter. . .

Before we go, how about the competitors, Bill?

I'm sorry. In terms of competitors, there are certainly other companies that are in this space or trying to be in this space with relatively lower cost instruments and technology. Although to be perfectly frank, Accuri was the leader and remained the leader at the time we acquired them in being at a price point and technology capability that we think is excellent from around the world. The other companies that are involved are companies like Millipore, through Guava, Partech, which is a small company in Germany and several others. You'll probably note that we've talked about this, Bill, that Life-Tech has a product called the Attune. There are a variety of companies that see this as an opportunity area with the leaders in Flow Cytometry around the world, so we see this as our space. So but then moving onto the desk top sorter. Again, it's personal Flow Cytometry for cell sorting making it available to the world.

Your next question comes from the line of Jon Wood with Jefferies. Jon Wood - Jefferies & Company, Inc.: Bill, just a follow-up on Accuri, is this a transaction where you think you can get back to your cost of capital in say, three years or have you assumed the longer discount horizon? Just basically you commented this is our space. Is this a necessary poll [ph] you needed to fill? So more of a defensive type of strategy over this asset.

Yes, this is Vince. As Bill mentioned, as the leader of Flow Cytometry, this was a natural move for us into a new segment of Flow Cytometry that was developing. So it's a smaller market today. The reason we see that it's not just the price point on this instrument and the performance. Bill's group has done some interesting strategic planning work that shows other applications from other areas of science that appear to be potential application areas for us with this new instrument. So as the technology leader in this space, we have to be there. And I think that's what Bill was talking about. As we see genomics and other things starting to bud up with Flow Cytometry to create new value. Now in terms of capital small acquisition like this it's not something that returns capital in the three years, but in the first three years. But certainly it's setting us up for enlarging the Flow Cytometry market significantly and bringing new capability. That's the way we're thinking about it. Jon Wood - Jefferies & Company, Inc.: Okay. Thanks, Vince. And one follow-up for Dave on the resin side. We talked about cost offsetting some of that pressure. Are we at the point or when do we get to the point to start putting in some opportunistic price increases similar to what you guys did in FY '09? Is there a pressure point you think about in terms of when you start you need to start increasing price?

We continue to evaluate that. It's not just the resin costs as you rightfully pointed out, it's also other commodity costs that are currently increasing. And that's why our efficiency programs are so important and also some of the things that we're doing on the greening of BD and trying to get these resin cost out of our products is another thing. So our reliance on the use of these commodity type products were looking to decrease do that. But as you know, Jon, traditionally as we look at prices as we launch new products, that's where we look to get the premium for the better product that's out there. But we'll continue to evaluate that and keep you guys updated.

Yes.

Sure.

Your next question comes from the line of Brian Weinstein with William Blair. Brian Weinstein - William Blair & Company L.L.C.: Another question on TriPath. You mentioned in the U.S. it's down due to some interval changes there or recommendation on interval screening. How far into the structural change in the demand curve are we there? Does it get worse from here? And is there any chance this affects other women's health test if women are not coming in for this basic testing and maybe putting off other testing as well?

This is Tom Polen. Good question, Brian. So we certainly see this interval change went to affect last year. And as you look at OB/GYN office visits and even Pap testing last year, you saw more significant declines last year from that interval change. So more in the 10% to 15% depending on the quarter of comparison last year. So we're actually seeing the slope now start to come to a smoother level as that interval changes. It's now getting into a full year of its cycle impact. Brian Weinstein - William Blair & Company L.L.C.: All right. And then another one here for Tom. What percentage of the market do you think is converted to molecular MRSA and molecular Cdiff testing at this point?

We would say it's still certainly less than 20% at this point in time.

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

I guess one more margin question. You guys continue to see a higher mix of emerging market revenue. What's the trade-off, if any, of having a higher mix of emerging market revenue at the gross margin and operating margin line? Is it materially different from other geographies?

No, it's not materially different. When we look at our operating margins in those areas, in emerging markets versus developed, well, they're basically the same. And so we've been able to sell value and do it very effectively.

Okay, and then if I could go back to Pharma Systems for one more loose end. As it’s been discussed a couple of times, you guys had a very good quarter in U.S. Pharm Systems. You highlighted the $7.5 million order, I think, in response to Kim's question. How should we think about it? Was that incremental relative to what you had incorporated? The full year guidance, is it demonstrative of potential improvement in this business? Or is that simply consistent with what you're expecting in the inherent lumpiness of this business?

I'll let Bill Kozy answer that.

Yes, this is Bill Kozy. I think the comments I made were onetime events related to the third quarter. We can't see these types of events on a -- excuse me, the second quarter. Excuse me. We can't see these recurring, but they're unanticipated and they just go with pharmaceutical needs related to inventory or validation testing of new potential products. So it's not a constant flow of these types of things.

Yes, it's up and down.

Okay. And last loose end. Moving forward, is this -- will we not be breaking out H1N1 and stimulus anymore? Is this the last quarter for that?

I hope so.

Your next question comes from the line of Tony Butler with Barclays Capital.

Thanks very much for your patience. Tom, there's a lot of commentary around Pap line decline in the decay curve in the U.S. Are you just shifting investments from the U.S. to non-U.S. assuming that pickup in demand? Is that exactly what's happening on the cost side? And if we ask methodically get to some steady state in the U.S., is there any way to consider reinvesting in the U.S. to maybe gain share? Thanks a lot.

So we have not reduced investments in the U.S. in our TriPath business. So we do see that this interval shift is something which is happening now but will stabilize in the future. Internationally, we are significantly investing in our channel in those markets, but it's not coming for specifically within the TriPath portion of the Diagnostic business. As we think about shift in category position over time, we really look forward to our SurePath Plus product, which is in clinical studies, which we really see as a breakthrough technology that offers potentially significant improvements in sensitivity for detecting cervical cancers. That is that product continues to progress to our expectations in clinical trials, and we're on track to launch that in FY '13.

Your next question comes from the line of Robert Goldman with CL King. Robert Goldman - CL King & Associates, Inc: I wanted to go back to a little bit the discussion of emerging markets in safety devices. A couple of questions on it. First, to the extent you have the sales in the emerging markets, could you just remind us what percent of those sales are products manufactured in the same market? And then second, the opportunity in the emerging markets are obvious enough. What I don't have a great visibility on is what threats you might face in the emerging markets? There do seem to be a number of local manufacturers now in China and perhaps you can give us some detail on where they are in their own corporate development, and when they might pose a real threat to you in those markets?

So Gary can comment on those issues both the competition in emerging markets, and we don't get into the details of our sourcing. But, Gary, maybe you want to throw your comments there.

Sure, this is Gary. First, in terms of where we manufacture, we manufacture safety devices, safety engineering devices in many different plants around the world. U.S., Singapore, Europe, Brazil and China. So we have a fairly diverse portfolio of manufacturing locations and it varies by business unit. It varies by device type. Many of those are global sourcing facilities or at least regional in some cases. They are specific to the country, again, depending on the device. In terms of competition, I would say in general we're keeping a very close eye on emerging market competition. We see local manufacturers strengthening over time. Was really two things that are happening. The lower quality manufacturers we expect will drop by the wayside over time and there will be consolidation among manufacturers towards the leading manufacturers in emerging markets. And there's a few -- there's one that's particularly strong in China. There's one that strong in India. We, as part of our efforts around projects such as ReLoCo and given how close we were working in the emerging markets, we set our sights as being competitive on every aspect. On cost, certainly on quality. And we tend to be differentiated in our institutional knowledge that we bring to the market in terms of training to upgrade Medical practice. That's actually harder to copy than the products themselves because based on many decades of knowledge that also comes from us having been the underlying pioneers in most of these categories. So as we look at competition in emerging markets, we look at it from a total perspective of both product, price, quality but also of our ability to bring necessary knowledge into the market, which is very much valued by the customers and government that we're working within those markets. And we seek to be competitive in all segments. So today, a lot of our business in emerging countries is in the top-tier hospitals. But our strategy taking us into mid-tier or lower-tier hospitals over the coming years also to be fully competitive with where the local competitors tend to be stronger, which is in the lower-tier hospitals. So I hope that give some color to the questions. Something we watch very closely and we anticipate that they'll continue to emerge. But BD's gone a long time being very effective at low cost, high quality and innovation around these core device categories.

Your next question comes from the line of Jaimin Patel with Greenlight Capital.

It's Vinit Sethi along with Jaimin. A couple of specific questions. One is, are you expecting the tax rate to maintain itself from the second quarter level of 27.4% for the rest of the year? And the second question was are there any changes to what you're expecting in terms of the selling and admin percentage for the year?

So first on the tax rate Vinit. What we're seeing is from a guidance perspective, it's going to be at the low end of the range that we originally provided. So it's going to be about 27%. So we'll see some improvements there, particularly from our mix of business and a lot of that's driven, particularly if you think about the dollar and its weakness, we're not a curse we have more profits coming from lower tax jurisdictions. So we'll get some benefit from our mix of business so that's why around 27%. As far as the SG&A, there's no real change in our guidance from an SG&A perspective. We continue to invest in the emerging markets, and we got these product launches so we want to make sure we put the resources behind that and we're making very good progress on the G&A side of things with our shared services, as well as our Functional Transformation that we have going on to take cost out there. So that's enabling us to invest in those growth drivers.

Okay. And so all in, with the currency movements and then the negative issues like the resin, costs in Japan, all in there's not much operating leverage impact one way or the other from the overall higher revenue?

The operating margins overall we're guiding in that 22.7% to 22.9% range. So really hasn't changed that dramatically.

Okay, got it in. And then finally...

I think the story there is again we're being hit by things that are impacting our operating margins. The resins, Japan, those are all negative pressures this year. And we've overcome that with our efficiency programs that we've put in place.

Right. And then, I guess, the final question on that is at this stage why don't you expecting whether it's some of the R&D investment of this year, whether it's Japan, resins, other sort of investing things. At this stage, why are you not expecting to be able to get through that in terms of operating margin leverage? So when would you expect to start showing kind of the improvement all the way down to the bottom?

Well, I think there's a couple of things that we talked about on previous calls. One is that this is the year where we're getting to the breakeven point on our ReLoCo programs, and we'll start to see benefits next year and in particular, fully in 2013. As we also talked about from a pension perspective, we're hopeful where interest rates are going that that'll stop being a drag as we go forward on the business. And those are probably the two biggest items. Also the last one is our SAP implementation. The big go live for us is next year in North America. So we still have another year of investment in that in '12. So the operating leverage is more towards the 2013 as we start some investments occurring as we go into next year.

Your next question comes from the line of Peter Lawson with Mizuho Securites.

I just wondered if you could talk further on the Biosciences business. Beyond flows, where else are you seeing the opportunities?

I'm sorry, it was Peter? Bill Rhodes. So remember, of course, the Biosciences is not only our Flow business but includes our advanced Bioprocessing business as well as Discovery Labware. So moving -- and there are opportunities in our flow business to address new markets that are contiguous with flow. What I'll answer is that our Advance Bioprocessing business is releasing two products. Has in fact, released one and is releasing a second product this year, which is really to provide reagents to support pharma and biotech companies. And within [ph] we're looking at cell therapy enablement, that's one of the more exciting areas for growth.

And then just a question for Tom on GenOhm. I wonder if you could give us the contribution to revenues either in the quarter or the full year and the mix between C. difficile and MRSA.

We wouldn't breakout specifically MRSA or Cdiff independently. But we again, we see both having strong double-digit growth in the quarter.

And the total number for GenOhm?

For the quarter, we are at...

For the full year, we're guiding around 20% increase in GenOhm for the full year.

Correct.

Okay. Thank you. And just the OB/GYN channel, did you see any better pick up at the initial weeks of Q3?

We don't comment on that.

No. We're still seeing that OB/GYN business were down. I think Tom said earlier in the call around 4%. So not much change.

You're welcome. So I believe we have no more questions. I want to thank everyone for their questions today. We are pleased to report a strong quarter. We look forward to updating you at the end of next quarter. 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.