Danaher Earnings Call Insights: Life Sciences and Western Markets
Scott Davis – Barclays Capital: I’ve never heard anybody get so excited about a color of the year contest or Pantone must have missed that journal addition, anyways.
H. Lawrence Culp, Jr. – President and CEO: We’ll get a copy (indiscernible).
Scott Davis – Barclays Capital: Congratulations on that. There is a little bit of a disconnect, when you think back to your Investor Day in mid-December, you were pretty cautious overall even including like Life Sciences and you came in with a pretty strong volume. Now you’re getting a little bit more cautious from 1Q as far as core growth. Was there a pull forward at all in that last couple of weeks at December in Life Sciences or anything and related to book-to-bill that would give you some concern about the start to the first quarter?
H. Lawrence Culp, Jr. – President and CEO: Scott, I don’t think in terms of the big picture there is really any change six weeks on here from what we said in New York in mid-December. Clearly, we finished more strongly than we had anticipated even then when we were together, but I don’t think we’re at a point here where we would extrapolate too much too soon from that strong finish. Clearly, we saw the new products that we launched midyear in Life Science and the Diagnostics, particularly in Life Sciences at AB SCIEX and Leica Micro finished quite strongly both in terms of the underlying order book, but also the product we were getting out the door. I think we would also acknowledge that in Dental, (another) business has kind of led their way here for us in the fourth quarter, they probably saw a bit of a surge in demand at the end of the year in part just because of all the uncertainty around tax policy in general and the section 129 depreciation dynamic particularly. I think if you look at the exceptionally strong finish we saw in North American in dental equipment particularly around imaging, it’s hard not attribute some of that to the uncertainty around the tax situation. I think we saw a nice a pickup particularly in the U.S. it looked more like a sprint of the finish as opposed to anything, we’re going to call structural at this point in some of the industrial businesses. Again, we mentioned Fluke going positive in the fourth quarter, PID was quite good. So, I think if you look at Life Sciences & Diagnostics for example. I think that second half core growth of 3% probably little bit indicative of what we’re looking at going forward, pretty much in line with the 2% to 5% guide we gave you in New York. I think Dental again we would say maybe it’s a point of core that we’d adjust downward to try to look at the run rates given what we saw here in North America. So again, I think we are pleased with the finished, we wouldn’t – but we think it’s premature to try to cash that strength too far at this point given what we’ve seen.
Daniel L. Comas – EVP and CFO: Scott, the other dynamic we have in the first quarter, we have one less business day. And it probably doesn’t impact much the 60% of the business that’s equipment in instruments. But as we look back, it definitely impacts the 40% that’s consumable and that alone probably impacts the first quarter by half a point to a point.
Scott Davis – Barclays Capital: Just as a follow-up guys I mean, we’ve seen a real pick in China in medical spend, I think consistently across most of the companies that we cover and yet, what’s your experience here? I mean the sustainability? There was a history in some of these markets that the government would have its big spend cycles for a quarter or two and then not spend for another couple quarters. I mean is there something at this time around that might lead us to believe that this is more of a sustainably higher level of spend that as a new trend given government initiatives, I mean how do you guys over there thinking about that?
Daniel L. Comas – EVP and CFO: Scott, I was in China two weeks ago and we spend a fair bit of time on this on this subject. I think it’s interesting if you just look at our own trend through the course of last year, we really saw quite the bifurcation between our Industrial businesses and our Health Care businesses, both LS&D and Dental. We were basically up 20% for the full year and we saw that strength throughout the year on the Health Care side of the portfolio. We were down nearly double-digit the first half on the Industrial side and our improved overall numbers in China were a function of Industrial basically getting to a flat level in the second-half. I thing when we look at what’s happened in Life Sciences & Diagnostics, we are clearly the beneficiary of a multi-year build out with respect to the Health Care delivery particular in the West, but also increased utilization. I think that I will continue – that program clearly stood up when others didn’t during the government transition here of late. I think on the Life Science we’re clearly benefiting as others are from the government’s effort to build out an indigenous research and development base. I’d say the Dental is still in its infancy and our own execution there has gotten quite good the last couple of years, but it was an area where we had clearly underinvested and that’s underperformed. I think we see that as part of a long-term trend, just given the demographics in China. So, our sense is that this not a quarter or two, but healthcare is important for whole host of different reasons over there and we’re well-positioned. I think on the industrial side, what our folks were pointing to was again stability, some sub sequential strengthening but probably a point of view that things get better through the course of the year as we have more certainty as to who is in some of the lower level jobs as the new regime takes shape. Once those decisions are made, we’ll see hopefully an initiation of more spending than we have seen clearly in infrastructure, where we’re keen to see some of that, I think, given some of the recent headlines around the environment. We’d be well positioned in that one area where we saw increased interest both on the – obviously on the waterside. So I think our view on China for ’13 is good. Again, longer term, I just don’t see these healthcare trends that we’re seeing in our number, Scott, tailing off. We just don’t.
Jon Wood – Jefferies: So Beckman Diagnostics, like to touch on that. It looks like that business is actually above market for the first time and quite some time in the fourth quarter. You spoke to some of the high growth market trends, but can you speak to the developed world, which you’re seeing in that business, particularly in the U.S.? Then just comment, why is a low single-digit number still relevant vis-a-vis that fourth quarter trend?
H. Lawrence Culp, Jr. – President and CEO: Yeah, well I think, Jon, the outlook as you suggest for this year is still low single-digit as opposed to mid-single. We were at low singles through the first three quarters and really thought that’s where we would be in the fourth quarter. I would say that clearly from a geographic perspective, the growth we’re seeing at Beckman is really a function of, if you will stability in the West with strength in the high growth markets. I think we still have work ahead of us as we pay-off some of the inheritance tax here in the U.S., again encouraged by retention and win rates in that regard, but that’s a multiyear effort to get what is fundamentally a business where the consumables drive the growth and that’s a function install base. Just going to take us while to do that. So, again, we were very encouraged by the fourth quarter fleet with respect to the AU, the new AU series. I think with respect to about Europe, I don’t think we’re really expecting the European market to contribute to grow, but stability there even if it’s at the low single-digit grind down, if we’re executing better as I think we will in 2013 that’s not as much of a drag on us as it has been in the last couple of years. So maybe we’re conservative with respect to what we’re capable of delivering in this market in the West, but I think at least here in ’13 the general mix will be similar to what we’ve seen, we can do better. Obviously, we’d love to do that, but really see that mid-single-digit growth more in ’14 than this year.
Jon Wood – Jefferies: I know you’re going to reframe from kind of committing on the FDA front, but anything in your correspondence with them that would suggest kind of that troponin submission is further out than we may think or has the feedback from that organization been. Just again procedural at this point. So I’m looking for any color you’re willing to share on where we are on the troponin situation in the U.S.?
H. Lawrence Culp, Jr. – President and CEO: John, I appreciate the way you framed that, because as you know, our practice has been to I think respect the sanctity of the dialog with the agency and not be too public with the details. I would characterize the conversation as constructive, productive and ongoing. So we’ve I think publicly tried to avoid being too specific about where this conversation takes us and in the timeframe in which we get the final resolution. I think we continue to be optimistic that we will have that product on the market in the future. Again, it is tough to put a finger on the calendar as to exactly when but we are no less convinced that that will happen in time as we work through the topic with the agency. Again, I would reiterate that while that is an open switch here in the U.S., it continues to be a product in the market and many other places around the world. With so many of the other improvements that we’re making at Beckman in the U.S. that customers can see in terms of quality, in terms of service, other new product introductions, the way our call patterns are set, this is so many positive effects from the implementation of DBS that even without the troponin assay in our arsenal today, you’re seeing those improvements in retention rates and win rates. So I understand the focus. It is a very fair question, but customers weigh a lot of different things when they’re making a decision and increasingly many of those other things are in Beckman’s favor. Obviously, when the troponin is back on the market, there will just be one more check on our side of the ledger but we’re not there today.
A Closer Look: Danaher Earnings Cheat Sheet>>