The calendar-year first quarter proved challenging for some major publicly held instrument and laboratory product companies. In general, industrial end-markets were soft, US and European academic and government spending remained constrained, and a weaker yen hurt sales and profitability. In addition, Bruker and PerkinElmer experienced unexpected events related to operational issues and weaker-than-expected sales in specific markets, respectively.

Revenues grew 2.2% in the calendar-year first quarter for the eight businesses whose quarterly results are detailed on pages 9–11. As usual, Illumina defied the trend, posting double-digit growth. In contrast, sales for two companies, Bruker and PerkinElmer, declined. Acquisitions boosted growth for Bio-Rad Laboratories Life Science (LS) and Illumina. Reported sales for all companies were negatively impacted by the depreciation of the yen against the US dollar.

Quarterly operating profits for the eight businesses declined 0.1% in total. Agilent Life Science (LS), Agilent Chemical Analysis (CA) and Illumina each showed double-digit growth in operating profits. However, four businesses reported operating losses, led by Bruker, which was impacted by operational issues. Operating profits for companies such as Bruker and PerkinElmer with smaller local operations or expenses paid in yen were disproportionately affected by the yen’s depreciation. Waters sustained profitability from its Japanese business despite a minimal physical presence due to sizable margins.

Overall, sales to industrial, academic and government end-markets were slow during the quarter. PerkinElmer and Thermo Fisher Scientific Analytical Technologies (AT) in particular noted the slower sales to industrial customers. The good news was the sales growth in applied and pharmaceutical markets. Agilent LS, PerkinElmer and Thermo AT reported growth for food safety products. Agilent LS, Thermo AT and Waters reported growth in sales to pharmaceutical companies. Sequestration continued to affect US academic and government spending, as noted by all companies, except Illumina.

MS and LC sales continued to grow during the quarter, according to Agilent LS, Thermo AT and Waters. Both Bruker and PerkinElmer noted surprising sales weakness for in vivo animal imaging products. Next-generation sequencing-related product sales were a highlight for Illumina, Life Technologies and PerkinElmer. Other notable areas of strength were bioproduction sales for Life and Thermo AT, informatics revenue for PerkinElmer and high-end MS sales for Waters.

Regionally, China remained a leading market. Perkin?Elmer and Thermo AT each reported growth in Chinese sales of 20%. Both Agilent LS and Waters reported stronger growth in India. However, PerkinElmer and Waters noted weaker-than-expected demand in Japan, but expect prospects to improve in the second half of the year. In Europe, industrial markets were especially weak, according to Bruker, PerkinElmer and Thermo AT.

As for forecasts, most companies anticipate a continuation of the current environment in most end-markets. However, improving growth in selected product lines and steady growth in Asia and the Americas is expected to result in sales growth for the year. Cost containment actions remained in place for most companies. Agilent announced a new $50 million restructure program, which will primarily impact its Electronic Measurement Group. Thermo announced that, in reaction to sequestration and weak industrial markets, it was implementing $10 million of contingency cost actions.

Information presented below is based on companies’ financial reports, SEC filings, and conference calls and presentations.

Agilent Life Science (LS) fiscal second quarter sales grew 4% organically. Pharmaceutical and biotechnology sales increased 8% due to sustained demand for LC and LC/MS products, technology upgrades and elevated spending by biotech customers in the US. However, revenue growth also benefited from a weak year-over-year comparison, especially in China. Academic and government sales fell 5% due to lower US government spending. Sequestration reduced LS sales growth by roughly 0.5%. Sales to Asia Pacific, the Americas and Europe accounted for 37%, 36% and 27% of LS sales, respectively. Adjusted LS operating income jumped 38.6% to $61 million due to lower operating expenses. Gross profit margin advanced 200 basis points to 51% of sales. For fiscal 2013, LS sales are projected to grow 3%–4% organically, with operating margin above 15% of sales.

Agilent Chemical Analysis (CA) sales grew 5% organically due to demand for new GC-QTOF and ICP-QQQ systems and for food safety products in emerging markets. Petrochemical and food sales grew 3% and 8%, respectively. Forensics and environmental sales fell 7% because of lower government spending in the US and Europe. Sales to Asia Pacific, the Americas and Europe made up 42%, 30% and 28% of CA sales, respectively. Adjusted CA operating income climbed 21.9% to $89 million due to lower operating expenses. Gross profit margin was unchanged at 51% of sales. CA revenue is expected to grow 3%–4% for fiscal 2013, with operating margin above 22% of sales.

First quarter sales for Bio-Rad Laboratories Life Sciences (LS) declined 1.6% organically due to lower research funding in the US and Europe. European sales declined more than 10%. Sequestration negatively impacted sales growth by roughly 1.3%. Conversely, digital PCR revenues grew in double digits. Sales of the AbD Serotec antibody products totaled $6.2 million. Adjusted LS operating loss was approximately $3 million, compared with a gain of $3 million a year ago due to pricing, product mix and increased productivity investments. Total company 2013 currency-neutral sales are projected to grow 3.5%–4.0% including acquisitions.

Bruker’s first quarter Scientific Instruments (BSI) revenue declined 1.0% organically due to lower demand from industrial markets, especially in Asia; shipment delays; and operational issues. System revenue grew 3.6% to make up 85% of BSI sales. Aftermarket revenue slumped 29.2%. BSI adjusted operating profit fell 50.6% to $21.6 million due to lower sales and higher operating expenses. Gross profit margin declined as a result of increased investment in Bruker BioSpin and the depreciation of the yen against the dollar.

Bruker BioSpin sales grew in the mid-single digits excluding acquisitions due to higher sales of NMR products. However, group sales were negatively impacted by timing of some NMR and MRI installations as a result of magnet-rework issues and the availability of liquid helium. Orders for NMR products were strong in Europe and North America. However, preclinical imaging sales were weak. Excluding the divested Japanese Thermal Analysis business (see IBO 9/15/12), Bruker MAT (BMAT) sales declined in the low single digits due to weak demand from semiconductor and data storage markets, which account for roughly 20% of segment sales, a strong year-over-year comparison and lower backlog to begin the quarter. Within BMAT, sales for Bruker Nano Surfaces fell in the high single digits as a result of lower sales of atomic force microscopes, stylus and optical metrology products. Sales for Bruker AXS declined slightly, as increased demand for XRF and XRD products was offset by lower sales of X-ray crystallography products to US academic customers. Sales for the Bruker Elemental and Bruker Nano Analytics divisions improved due to new products. Bruker CALID sales declined due to operational issues, including order execution challenges, in the Bruker Daltonics Life Science and Bruker Optics divisions. The company lowered its reported full-year revenue growth forecast by 200 basis points to 2%–3% due to currency, but maintained its organic growth outlook of 3%.

First quarter sales for Illumina climbed 18.2% organically due to strong sequencing revenues, which grew 32% to account for 71% of sales. Sequencing consumables revenue jumped 40% due to higher instrument sales and utilization rates, and strong demand for sample preparation products. Instrument sales benefited from increased shipments of HiSeq and array systems. Half of the HiSeq orders were for commercial, clinical and translational customers. Sales of sequencing instruments improved 7%. Despite increased unit placements, MiSeq revenue was slightly lower due to higher pricing a year ago. Roughly 50% of MiSeq sales were to nonacademic customers, of which more than half were for clinical applications. Service revenue expanded due to the acquisition of Verinata (see IBO 1/15/13) and increased genome and microarray services. Shipments of exome samples surpassed 300,000 during the quarter. Microarray sales grew 1% including the acquisition of BlueGnome (see IBO 9/30/12) and higher sales of iSelect genotyping products. Overall, sequestration lowered sales growth by roughly 3%–4%. Sales to the Americas, Asia-Pacific and Europe grew 28%, 21% and 16%, respectively. Sales to Japan more than doubled sequentially due to increased government spending. Adjusted operating profit climbed 18.1% to $85.8 million. Adjusted gross profit margin expanded 50 basis points to 68.7% of sales due to operational efficiencies. The company did not update its 2013 outlook.

First quarter sales for Life Technologies grew 3.3% organically, including 0.8% growth from royalties and licensing settlements. Research Consumables sales declined due to lower spending in the US and Europe and a strong year-over-year comparison in Japan. Sales to the Americas grew 5%. Excluding currency, sales to Asia Pacific, Europe and Japan grew 10%, 3% and 1%, respectively. Genetic Analysis sales were driven by sales of Ion Torrent products and royalties including licensing settlements, which added 2.1% to segment sales growth. This growth was partially offset by lower sales of capillary electrophoresis and SOLiD systems. Within Applied Sciences, the BioProduction and forensics businesses posted double-digit sales growth. Adjusted operating profit slipped 0.1% to $283.0 million. Adjusted gross profit margin declined 38 basis points to 66.2% of sales due to product mix and currency. Second quarter sales are projected to be roughly flat at $950–$955 million.

PerkinElmer’s first quarter revenues declined 1% organically, primarily due to weaker-than-expected instrumentation sales in Europe and Japan. All sales figures below are organic. Instrument and components revenues declined in the high single digits. Recurring revenue grew in the mid-single digits due to higher sales of diagnostic products and increased service revenue. Sales to the Americas grew in the low single digits. Excluding currency, European sales declined in the high single digits and Asian sales fell in the low single digits. Within Asia, Japanese sales declined 15% organically to account for 5% of company revenues, sales to Korea and Southeast Asia each declined in the double digits, and sales to China grew roughly 20%.

PerkinElmer adjusted operating income contracted 19.3% to $63.7 million due to lower sales of higher margin products and increased R&D and productivity investments. Adjusted gross profit margin fell 240 basis points to 47.3% of sales. The company transferred the Bio-discovery and Informatics businesses from the Environmental Health (EH) segment to the Human Health (HH) segment. PerkinElmer lowered its 2013 organic revenue growth outlook from mid-single digits to low single digits. Second quarter sales are projected to grow 0%–2% organically.

Within PerkinElmer HH, Research sales contracted due to a roughly 40% decline in sales of radiometric detection systems in Japan and a more than 25% decline in sales of in vivo imaging systems, which accounted for roughly 16% of company sales, as a result of sequestration in the US and lower research spending internationally. This decline was offset by a more than 20% climb in sales of informatics products and higher demand for sample preparation for next-generation sequencing and reagents for biotherapeutics and high-content screening. Screening and Medical Imaging sales each grew in the mid-single digits. Screening revenue benefited from higher birth rates in the US and increased prenatal, newborn and infectious disease testing in China and other emerging markets. HH adjusted operating income fell 9.7% to $50.3 million.

PerkinElmer EH was negatively impacted by lower-than-expected sales of instruments in Western Europe, and to chemical and energy markets. Sales of environmental instruments in Western Europe declined in the mid-teens. However, analytical instrument sales for air and water applications were steady, and food safety products sales grew in the high single digits. Laboratory service revenue was strong. EH adjusted operating income slumped 31.4% to $23.3 million due to lower sales volume and instrument mix.

First quarter Thermo Fisher Scientific Analytical Technologies (AT) sales improved 0.6%, led by higher demand for BioProcess production products, primarily for single-use technologies for biopharmaceutical markets. Increased sales for food safety and air quality systems, especially in China, and for MS also contributed to revenue growth. Despite areas of growth, sales to applied customers were weak. In addition, industrial sales declined, especially for chemical analysis systems. To begin the year, the company transferred $100 million in revenue, consisting of its water analysis and research serum media product lines, as well as $20 million in adjusted operating income, from AT to Laboratory Products and Services. AT adjusted operating income declined 1.5% to $176.1 million. Adjusted operating income margin fell 20 basis points to 18.0% of sales due to currency and product mix. Total company sales in North America grew in the single digits; Asia-Pacific sales grew in the high single digits, including more than 20% growth in China; and Rest of World sales grew in the mid-teens. European sales declined slightly. Thermo raised the lower end of its full-year revenue range by $40 million for growth of 3%–4%. Organic sales are projected to grow 1%–3%.

Waters’s first quarter sales grew 5% organically due to strong MS sales to government and academic customers and higher demand from pharmaceutical markets in China and India. Overall, academic and government sales grew 7%, but benefited from a weak year-over-year comparison. Industrial sales grew 3%–4%. US sales grew 6% due to increased demand from pharmaceutical and industrial customers, but were partially offset by lower sales to government and academic markets. Excluding currency, sales to Europe and Asia (excluding Japan) grew 1% and 5%, respectively. Japanese sales declined 2% in local currency. Sales to Rest of World were strong. Adjusted operating profit slipped 0.3% to $112.9 million. Gross profit margin declined 80 basis points to 59.4% of sales due to product mix and currency. The company maintained its full-year organic revenue growth outlook of 5%. Currency headwinds were slightly raised to 2%. Second quarter sales are expected to grow 3%–4%, or 5%–6% organically.

Within the Waters Division, Instrument sales were driven by double-digit sales growth for tandem and single quadrupole and Q-TOF MS systems. On the chromatography side, demand for ACQUITY UPLC H-Class and UPC2 systems was highlighted. Pharmaceutical sales grew in the mid-single digits organically, led by increased spending from specialty clinical diagnostics customers, CROs and emerging markets. Government and academic sales expanded in the high single digits. Industrial, chemical and applied markets grew modestly. Service and Chemistry Consumables were negatively impacted by two fewer selling days and a strong year-over-year comparison for Service revenues. TA Division sales benefited from increased demand for instrumentation from industrial customers, high temperature systems and increased Service revenues.