Good day, ladies and gentlemen, and welcome to the third quarter 2009 PerkinElmer earnings conference call. My name is Thomas, and I will be your operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Dave Francisco. Please proceed.

Thank you, operator. Good afternoon and welcome to the PerkinElmer third quarter 2009 earnings conference call. I’m Dave Francisco, Vice President of Investor Relations and Treasurer for PerkinElmer. With me on the call are Rob Friel, Chairman and Chief Executive Officer, and Andy Wilson, Senior Vice President and Chief Financial Officer. If you have not received a copy of our earnings press release, you may get one from the Investors section of our website at www.perkinelmer.com or from our toll-free investor hotline at 1-877-PKI-NYSE. Please note that this call is being webcast live and will be archived on our website until November 12, 2009. Before we begin, we need to remind everyone of the Safe Harbor statements that we've outlined in our earnings press release issued earlier this afternoon and also those in our SEC filings. Any forward-looking statements made today represent our views only as of today. We disclaim any obligation to update forward-looking statements in the future even if our estimates change. So you should not rely on any of today's forward-looking statements as representing our views as of any 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. I appreciate you joining us this afternoon for PerkinElmer’s third quarter 2009 earnings call. Overall, we are very pleased with our performance in the third quarter. Our results for the top line met our expectations, and we believe that our end markets are stabilizing, as we were seeing some encouraging signs of sequential improvement. Our operating margins were better than we expected, resulting in us exceeding our EPS forecast. Adjusted operating margin increased approximately 50 basis points over the second quarter of this year on virtually the same revenue base despite increasing R&D as a percentage of sales by approximately 30 basis points. We have been committed to fueling our pipeline of new products, as technology innovation will be a source of future growth. In the quarter, we continued to make good progress in our diagnostics business. We received 510(k) certification approval for our new neonatal screening systems and also launched our first child health screening kit. The new kit is the first commercially available clinical assay that can simultaneously measure and diagnose hormone imbalances. We also launched a series of product and service offerings in the research area, including the Columbus 2.0 high content system platform, the EnSpire with luminescence, and the LANCE Ultra panel. These products are aimed at core markets in drug discovery and academic research, focused on cellular imaging, stem cell-related screening technologies, and kinase reagent portfolio expansion for drug screening. We continue to deepen our customer relationships through our multi-vendor OneSource Laboratory Service business. The success of this approach resulted in both new and expanded OneSource programs in the quarter. Including the expansion of our OneSource agreement with a major pharmaceutical company, Boehringer Ingelheim, to cover more than 1,000 multi-vendor scientific assets at the company’s site in Germany. During the…

Thanks, Rob. And good afternoon, everyone. I’d like to now provide some additional color on our third quarter financial performance as well as provide guidance for both the fourth quarter and the full year 2009. After my prepared remarks, we’ll then open up the call for questions. Before moving into financial details, I’d like 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 third quarter of 2009 compared to the third quarter of 2008. To the extent that I use any non-GAAP measures, those measures have been reconciled to the comparable GAAP measure in the financial tables of the press release that had been posted on our website. As Rob mentioned earlier, we are pleased with our financial performance in the third quarter, a solid earnings and cash flow performance despite the ongoing challenges in a difficult global economy. Revenue for the quarter was down 9% as compared to the same period last year. The unfavorable impact of foreign exchange was 2%. The favorable impact of acquisitions was 1%. And therefore organic revenue growth was down 8% versus the prior year. The remaining revenue analyses in my prepared remarks will be presented excluding the unfavorable impact of foreign exchange and the favorable impact of acquisitions. Despite the 8% decline in organic revenue, we feel good about our top line performance in the quarter. Excluding the medical imaging (inaudible) businesses, both of which are keeping pace within their respective markets, but these markets are at a different point in the cycle, organic revenue declined at a low-single digit rate in the third quarter supported by very solid growth in reagents. By segment, organic revenues declined by 7% and 8% in Human Health and Environmental…

Thanks, Andy. Operator, at this time, we’d like to open the call for questions, please.

(Operator instructions) Your first question is from the line of Peter Lawson from Thomas Weisel Partners. Please proceed.

Hi, Rob. I wonder if you could kind of walk through the digital imaging business that seems to be the only business that seemed to have got worse quarter-over-quarter. How far do you think that business can drop? And what are you thinking about Q4 for that business?

I would say I think the end markets for that business actually seem to be stabilizing a little bit. And we are actually seeing some increased bookings for 2010. The reason why we are seeing a significant drop from Q2 to Q3, and I think we talked about this a little bit, is it really has more to do with the ordering patterns of our customers where they took more product in the first half of the year and less in the back half of the year. So while there was a decrease in the revenue, there actually is a stabilization in the end markets there. And we are actually thinking that now in 2010 -- probably mid-2010, we might see -- might actually start to experience some increases in revenue in that business.

Thank you. And then the incremental on R&D spend, what drove that?

I think it’s just fueling the opportunities we see in some of the attractive areas. So some of it is going into genetic screening, some of it is going into the research area, and obviously some of the analytical sciences area. So it’s pretty broadly spaced across the company, but it’s largely in areas where we see growth opportunities. And the other area I would spike out is, with the acquisition of ALB [ph], we have been increasing our investments in the mass spec area.

Okay. Thanks for taking the questions, Rob.

Your next question is from the line of Quintin Lai from Robert Baird. Please proceed.

Hi, guys. This is actually Jeff [ph] in for Quintin. Last quarter, you guys gave a little bit of a sequential improvement. As you talked from Q1 to Q2, you saw a little bit from January, February, March get a little better and all the way through July. How did you see that coming into now? If you can apply a little color on each end market, as we stand?

You mean, throughout the quarter?

Yes.

I would say we saw some consistent improvement. July and August was a little bit difficult because you are dealing with the summer months. But I would say, as we got through the quarter, we continued to see a little bit of an improvement throughout the quarter. And I think that speaks to a little bit of the optimism we have relative to stabilization and some early signs of improvement in the end markets.

All right. And then some of your competitors provide a sneak-peak into 2010. As we go up against easier comps and your end markets continue to stabilize, could you provide any color on your thoughts regarding when we return to our growth next year? And also, as you’re taking a lot of costs out of OpEx this year, how should we look at that ramping up as growth returns to the top line?

I would say with regard to 2010, we are right in the midst of that. Right now, we are actually in the process of putting together our 2010 plans. So it’s probably a little early to call when the turn occurs. And our plan would be to share with everyone our 2010 forecast and guidance in January. With regard to the cost ramp-up when growth returns, I would say, while we try to model that out and there will be clearly some increase in costs associated with the higher volume, keep in mind that as we’ve done restructuring this year, and we’ve done some restructuring in Q1 and some restructuring in Q3, that when you look at 2009, you have a partial year benefit for those restructuring actions. So I would say, helping to offset the potential increase of the cost associated with higher revenue in 2010 will be the full year benefit of the actions that we’ve taken this year.

All right. Thanks a lot.

Your next question is from the line of Ross Muken, Deutsche Bank. Please proceed.

Rob, in some of the key end markets where we did see some sequential improvement that are more cyclical in nature, what were some of the specific sort of end customer segments that showed signs of life? And what -- particularly on the industrial side, what specific customer segments are still sort of showing no order activity or your backlogs pretty bare?

I would say, on the environmental side, we clearly saw some improvements in sort of air and water monitoring particularly in Asia. We saw an improvement in our products that go into biofuels. We’ve actually seen a pickup in those areas. I would say on the industrial side, the ones that continue to lag -- I would say a lot of the industries that Andy mentioned previously, which is really around the chemicals and the polymers and the petrochemicals, I would say those are the ones that still seem to be lagging a little bit. But clearly on the environmental side, fairly broadly based we saw an improvement sequentially.

Okay. And in terms of the diagnostic business that’s more sensitive to sort of state and federal budgets or I guess more government-related funding, what’s sort of the outlook there? And as we turn the page to 2010, lot of the same challenges exist for a lot of the different regions. What’s sort of your thought process on how that business is going to performance in the face of some of those challenges?

I think we’ve been fairly fortunate in the areas that we sell into have not been impacted by the cutbacks in state funding. And so if anything, there may have been a little bit of a lag in people -- the state uptake of additional screening. But as far as cutbacks, we really haven’t experienced that. So I think our view of the screening business going into 2010 continues to do quite well. As Andy mentioned, it was up high-single digits this quarter, and I think it continues on that track. And we are seeing good adoption, particularly in some of our other areas like prenatal screening. So I think we are still fairly bullish on those end markets as we go into 2010.

And just quickly on the research business, remind us -- I know you had some new product launches, I think, last year or you were coming up against some weak comps in the year prior that made that a particularly strong quarter. What is that -- what are the different factors that impacted that research number? And then, how does the comp compare in Q4?

Well, in the third quarter of 2008, our research business was up 17%. And to your point, there were some new product introductions that came out, and so we knew we were cycling up against some difficult comps. Actually in Q4 as well, we had a pretty strong. We were up 9% in 2008. So while it’s less than Q3, it still was a pretty good comp. But I think Q4 should be better from a biodiscovery or from a research perspective because I just think we continue to get sort of the new products down and get good traction in those end markets.

Great. Thank you, Rob.

Thanks.

Your next question is from the line of Rob Hawkins with Stifel Nicolaus. Please proceed.

Hi, good afternoon. Can you spend a little bit of time on OneSource? Where are you guys seeing the resurgence there in that growth? And is it signaling any particular end market in terms of improvement that might, I guess, precede maybe some instrument sales?

I would say the area in service -- we saw in a couple areas this quarter. First of all, we did see -- and I think Andy alluded to this. We did see a recovery in billable service, which has been down the last couple quarters. So we are viewing that as maybe a potentially positive sign that people are back to sort of repairing their instrumentation. So that was a nice signal in the third quarter. We continue to see good opportunities on the outsourcing side. We mentioned the win in Boehringer Ingelheim, and that was a fairly significant contract for us. So we are still seeing the pharmaceutical companies look to outsource. I would say, the other area is -- and this is an initiative we started probably about 12 months ago. It is branching on into other industries outside of pharmaceutical. And then I would say, the last area, clearly we are seeing increases in our relocation service offering and clearly with the consolidation that’s going on in the pharmaceutical industry. There is a lot of opportunity for factories being consolidated to use our relocation service.

Just to follow on that. Just kind of where you are seeing the repairing starting to happen, I mean, is that typically a signal for ahead of people buying replacement instruments again?

I don’t know. I think it’s probably a little early to make that call, quite frankly. Maybe you see for a couple of quarters, but I would say, I think that’s a little premature.

All right. I’ll jump back into queue. Thank you.

Okay.

(Operator instructions) Your next question is from the line of Derik De Bruin, UBS. Please proceed.

Hi, this is Dan [ph] in for Derik. Rob, in the panels business, you had talked about taking out some costs in the back half of the year that you felt were necessary. How successful were you in doing that? And then what were the impacts to the margin?

So I think the group in the medical imaging has done a very good job managing the cost. And we’ve done it through the restructuring we’ve taken in the third quarter, as well as just doing some furloughs and trying to manage the cost very well. So even with the significant revenue declines that we have experienced in that business, we are still operating at operating margins in excess of the corporate average. And I would say, the other point is I think the organization has done a terrific job in improving the yield through the factory. So we are seeing both cost reductions as well as productivity improvements. That’s really contributing to some very good profitability coming out of that business despite the big decline in revenue.

Got it. And then in Asia, outside of China it looked like the things were pretty soft. Is there anything you can say about some of the other geographies, India and some of the surrounding areas?

I think India was okay. It’s particularly after the election I think we are seeing some strength there, sort of early days. I would say, the other area we did see some softness was in Japan. And what we believe maybe happening is with the election there that they are re-looking some of their stimulus money, and there seems to be potentially shifting from the life sciences area to energy and those types of areas. So we are keeping an eye on that. But I would say Japan was a little weak for us.

Okay. And then just finally, can we get an update on what your thoughts are for the reintegration of the specialty lighting business where it’s not be sold off before you anniversary that?

I would say our assumption still is that that business will be sold by the end of the year. So I think it’s probably premature to start talking about how that would be reintegrated, because I think we’re still fairly confident that in fact we’ll close before the end of the year.

Okay, thanks.

Okay.

Your next question is from the line of Isaac Ro, Leerink Swann. Please proceed.

Hi, this is actually Jody in for Isaac. Thanks for taking our questions. First of all, on diagnostics, how do you feel about the range of acquisition opportunities you have there? And do you have a preference geographically between US, Europe or elsewhere to help your global footprint?

I think we feel pretty good about our pipeline in that area. And I would say it’s both. It’s both technologies and products that we continue to look to expand our offerings and it’s also geographic. As you saw, we did two deals that were probably more geographically oriented to get us into India and China. Although having said that, as I mentioned, it did add some product extensions towards an infectious disease. So we’re really looking at from both perspectives. And I think we’ve had a pretty good pipeline there, and we continue to see opportunities to expand our capabilities in our diagnostics business.

Okay. And then, medical imaging, what’s your level of visibility in a rebound today versus six months ago? I believe GE said this quarter that their orders are still down high-single digit, which is slightly better sequentially. We wonder if that’s what you are seeing as well.

Yes. I think sort of I implied earlier that we are seeing some improvement, some, I would say, slight order take-up here. And so I think our view is that we probably hit bottom and that we are starting to come back here a little bit. I think Andy mentioned the fact that we also continue to feel like we’re making good progress on the non-medical markets. And so that will be coming online probably in 2010 as well. So I think we are, I would say, cautiously optimistic that we will start to see some recovery in that business, probably not significant in Q4, but probably into 2010 timeframe.

I see. Thank you.

Okay.

Thank you for your questions. I would now like to turn the call over to Mr. Rob Friel for closing remarks.

Thank you for your questions and continued interest in PerkinElmer. We feel confident that the strategy we set at the beginning of the year to balance cost controls in the short-term while investing in the innovative solutions for our customers and building greater capabilities will position us to be even stronger when the economy recovers. This concludes today’s call. Thank you for joining us. Have a great day.

Ladies and gentlemen, that conclude today’s conference. Thank you for your participation. You may now disconnect. Have a great day.