Sales improved sequentially in the fourth quarter of calendar year 2009 for major publicly traded analytical and life science instrument companies. Firms remained optimistic about improved economic conditions this year, with many forecasting a gradual improvement in sales as the year progresses. However, as many also noted, results will also benefit from favorable year-over-year comparisons.

Quarterly sales for the eight US businesses whose results are shown in the graphs on pages 9 and 10 rose 7.2%. Four businesses reported double-digit sales growth. Companies noted strong growth from worldwide stimulus and consumables sales. Quarterly operating profits for the businesses whose results are shown in the graphs rose 11.9% in US dollars. Shifts in product mix to higher instrument sales decreased operating profit growth for Bio-Rad Laboratories Life Science (LS) and Bruker Scientific Instruments (BSI).

A number of companies reported quarterly sequential improvements in revenues for industrial end-markets, but such markets remained soft, as noted by PerkinElmer and Thermo Fisher Scientific Analytical Technologies (AT). The exception was Agilent Chemical Analysis (CA), which reported double-digit sales growth for the petrochemical market.

Life sciences was a strong note for many companies during the quarter, including BSI and Thermo Fisher Scientific AT. Contributing to demand was stimulus spending, not only in the US, but in Japan and China. Japanese sales were strong in the quarter for businesses, including Agilent Life Sciences and CA, Bio-Rad LS and Waters.

For the six businesses reporting year-end results this quarter, total revenues declined 3.1%. Instrument sales declined for many companies, but aftermarket sales remained strong. Among the companies recording aftermarket sales growth in 2009 were BSI and Waters. Adjusted annual operating results for the six businesses rose 0.9%.

Combined fiscal first-quarter revenues for Agilent Technologies’ Life Science (LS) and CA segments grew 11.2%, 7% on a currency-neutral basis, to $584 million to account for 48% of sales. For the combined segments, pharmaceutical, academic and government revenue rose 8% and 15% to account for 33% and 10%, respectively. Sales to the petrochemical, environmental and forensics, and food safety markets grew 12%, 9% and 17% to make up 23%, 19% and 15%, respectively.

CA revenue climbed 13.0%, 9% on a currency-neutral basis, to $255 million to account for 20% of company sales. Orders improved 12.0%, 7% on a currency adjusted basis, to $242 million. Demand for GC/MS and ICP/MS instruments and services were strong, while consumables sales grew in the double digits. Sales to Europe and Japan each gained nearly 20%, while sales to other Asia rose 23%. European and Asia Pacific sales were 34% and 39% of segment sales, respectively. Sales to the Americas, which fell 3%, make up 27% of sales. CA operating income grew 17.5% to $67 million, while gross margins were 55% of sales. Agilent projected full-year CA growth of 15%.

LS revenue improved 10.0%, 5% on a currency adjusted basis, to $340 million to account for 28% of company revenues. Orders were up 9.4%, 4% on a currency-neutral basis to $336 million. The company benefited from double-digit growth in the microarray, reagent PCR and informatics businesses, and from products and technology introductions, including robust sales for the 1290 LC. Total revenue to the Americas and Europe improved 3% and 9% (3% currency-neutral) to represent 36% and 37% of segment sales, respectively. Sales to Japan climbed 16%, while sales to other Asia jumped 28% due to strong demand from China. Total Asia Pacific sales accounted for 27% of segment sales. LS’s adjusted operating income jumped 25.0% to $55 million, while gross margins were unchanged at 54% of sales. Full year LS revenues are anticipated to grow 10%–12%.

Revenues for Bio-Rad’s LS rose 12.1%, 6.6% on a currency-neutral basis, to $191.0 million, to account for 39.0% of company sales. Excluding BSE sales, segment revenue grew 9.7% organically due to a demand for amplification instruments, process media and electrophoresis imaging products. The company benefited from stimulus spending, which accounted for $6–$8 million in sales. Geographically, sales were strong in the US, Japan and Asia Pacific. Adjusted operating profits grew 25.2% to $17.4 million. Gross margins declined due to a shift in product mix towards instruments.

Full-year LS revenue declined 1.9%, but grew 0.8% organically, to $631.5 million, accounting for 35% of total sales. Excluding BSE-related products, which slumped over 30% due to lower pricing and reduced government-mandated tests, segment revenue grew 1.3%, 3.7% organically. The company reported positive revenue growth for real-time PCR instruments and reagents, multiplex protein analysis, electrophoresis and gene expression products. Sales to Asia Pacific, Latin America and the US grew, while European sales declined. LS’s adjusted operating profits rose 0.7% to $42.4 million, while gross margins improved slightly due to lower expenditures, favorable product mix and off-shore manufacturing for new products. For 2010, the company anticipates total revenue growth of 5% organically.

Bruker’s fourth-quarter revenues rose 16.2%, 6% on a currency-neutral basis, to $366.4 million. Product revenue climbed 20.0% to represent 90% of total sales, while Service revenue fell 11.2% to make up 9%. Other revenue rose 40.0% to account for less than 1% of sales. Adjusted operating income soared 50.4% to $77.0 million, while gross profit margin improved 295 basis points to 50.6% of sales. Revenue for the BSI segment climbed 12.8%, 3% on a currency-neutral basis, to $346.2 million, while operating income improved 55.0% to $78.3 million.

Full-year Bruker revenue grew 0.6%, 2% on a currency-neutral basis, to $1,114.5 million. Product revenue rose 1.1% to account for 88% of company sales, while Service revenue slipped 3.5% to make up 11%. Other revenue climbed 28.3%, but accounted for less than 1% of sales. In 2009, the company recorded over 100 orders from global stimulus spending, primarily for NMR, pre-clinical MRI, X-Ray systems and MS. Adjusted operating profit grew 17.3% to $136.9 million, while gross profit margins improved 92 basis points to 46.5% of sales. Full-year BSI sales declined 1.1% to account for 95% of company sales, due to lower demand from industrial markets. On a currency-neutral basis, sales were flat. Systems and Aftermarket revenue accounted for 75% and 24% of BSI sales. Revenue for the AXS and Optics divisions each declined in the single digits to account for 24% and 11% of BSI sales, respectively. BioSpin sales grew in the mid-single digits to account for 44% of segment sales, while the Life Science MS business of Daltonics gained over 10%. Total Daltonics revenue accounted for 21% of segment revenue. Geographically, sales to Europe, Asia Pacific, the Americas and Other countries represented 48%, 24%, 23% and 5% of segment revenue, respectively. BSI operating income rose 21.9% to $141.7. Gross margins improved to 47.9% of sales. For 2010, the company expects total revenue growth of over 5% organically.

On an adjusted pro-forma basis, fourth-quarter sales for Life Technologies grew 14.4%, 11% organically, to $874.1 million. Currency transactions contributed 4% to revenue growth, while the divested LIMS business resulted in a loss of 1%. GAAP revenues were $871.1 million. Excluding the MS segment, organic sales to Asia Pacific and Europe grew 23% and 11%, respectively, while sales to the Americas and Japan each grew 9%. For the quarter, the company recorded $8–$10 million in stimulus spending. Adjusted operating profits rose 29.8% to $225.7 million, while adjusted gross profit margins improved 130 basis points to 65.0 % of sales.

Revenue growth for the Molecular Biology Systems was driven by strong sales of H1N1-related systems, which accounted for roughly $15 million in sales, increased demand for TaqMan arrays, and qPCR instruments and reagents. Segment growth also benefited from higher sales of PCR instruments and consumables due to stimulus funding. Within the Genetic Systems division, the Applied Markets business recorded double-digit growth, while the CE Research business was flat following the LIMS divestiture. The Cell Systems division experienced strong demand for its Dynal beads and stem cell business, but was partially offset by lower sales from its Bioproduction division. The joint-venture MS segment, which contributed $16 million to operating income, grew 14%, 7% on a currency-neutral basis, to $130 million.

On an adjusted pro-forma basis, full-year Life Technologies revenue grew 5.0%, 7% organically, to $3,303.2 million, including a loss of 2% and 1% from currency transactions and the divestitures, respectively. Organic sales to Asia Pacific and Europe climbed 25% and 9%, respectively, while sales to the Americas and Japan each grew 4%. Molecular Biology Systems grew 7%, 9% organically to make up 48% of total sales led by double-digit growth for genomic assays and high single-digit growth for PCR systems. Genetic Systems improved 8%, 9% organically to account for 28% of sales, while Cell Systems revenues were flat, but grew 4% organically to represent 24%. The joint-venture MS segment declined 2%, 1% organically, to $492 million and contributed $46 million in other income. Adjusted operating income jumped 18.3% to $879.3 million, while gross profit margins improved 70 basis points to 66.3% of sales due to favorable pricing and synergies. In 2009, the company achieved $95 million in synergies and recorded $50 in stimulus revenue. For 2010, the company anticipates organic revenue growth in the mid-to high single digits, with a 1%–2% positive contribution from currency transactions.

PerkinElmer’s fourth-quarter revenues declined 0.3%, 5% organically, to $498.3 million. Currency transactions and acquisitions boosted revenue growth by 4% and 1%, respectively. Adjusted operating income fell 13.1% to $74.6 million, while gross profit margins slipped 46 basis points to 43.2% of sales. Organic sales to Asia grew in double digits, including over 20% growth in both India and China, while sales to the Americas declined in the high-single digits and European sales fell in the low-double digits.

Human Health sales were flat, but declined 5% organically to $194.2 million. Diagnostics sales declined in the mid-single digits organically, including a drop of roughly 30% in the Medical Imaging business. The decline was partially offset by strong demand for genetic screening, which grew in the mid-single digits organically. The company expanded its newborn screening business in China following the acquisition of Sym-Bio, and benefited from new screening labs in developing countries. Research business revenue declined in the low-single digits organically, but recorded positive sales growth for reagents and low-end instruments. Adjusted operating profits for the Human Health segment improved 1.0% to $36.7 million.

Environmental Health revenue slipped 0.6%, 6% on a currency-neutral basis, to $304.1 million. Within the Environmental Health segment, Lab Service revenue grew in the high-single digits organically due to strong One Source revenues. Environmental product sales fell in the low-double digits organically, but the company reported positive demand for air monitoring solutions in China, and global demand for renewable energy. Safety and Security product sales fell in the high-single digits organically, while Industrial sales fell in the high teens organically. Adjusted operating profits for Environmental Health fell 16.6% to $44.5 million.

Full-year revenues for PerkinElmer declined 7.5%, 6% organically, to $1,812.2 million, including a 3% decline from currency transactions and 1% growth from acquisitions. Adjusted operating income fell 11.7% to $229.4 million, while gross margins improved 42 basis points to 43.0% of sales. Human Health revenue fell 4.9%, to account for 41% of company sales, while adjusted operating income climbed 5.6% to $133.6 million. Sales for the Environmental Health segment dropped 9.3% to make up 59% of total sales, while adjusted operating profit fell 24.4% to $126.5 million. For 2010, total company sales are projected to grow in the low-to-mid-single digits organically.

In the fourth quarter, sales for Thermo Fisher Scientific’s AT segment grew 5.0%, but declined 2% organically, to $1,193.2 million to account for 42% of company sales. The company reported higher instrument sales driven by increased demand from industrial markets and product introductions. In addition, revenues for the specialty diagnostics and biosciences businesses grew in the mid-to-high-single digits. Adjusted fourth-quarter operating income improved 2.4% to $259.7 million, while adjusted operating margins slipped 50 basis points to 21.8% of sales.

Full-year AT revenues fell 7.0%, 6% organically, to $4,153.9 million, to make up 41% of total sales. Currency transactions reduced revenue by 2%, while acquisitions contributed 1% growth. The decline in revenue growth was attributed to lower demand for environmental and process control instruments within the industrial markets, but was partially offset by increased sales of bioscience and diagnostic products, including flu tests. For the year, the company reported $50 million in H1N1-related sales. Adjusted operating income slumped 12.4% to $837.3 million, while operating margins declined 120 basis points to 20.2% of sales. For 2010, the company forecasted total revenue growth of 5%–7%, including 1.5% growth from each acquisitions and currency transactions, to $10.0–$10.3 billion.

Fiscal first-quarter revenue for Varian’s Scientific Instruments division (SI) fell 3.0% to $166.6 million, to make up 83% of total sales. Growth was negatively affected by purchasing delays for instruments, but was partially offset by higher sales of research products due to a weak year-over-year comparison. SI adjusted operating profits fell 31.4% to $13.8 million. Adjusted operating margins declined 340 basis points to 8.3% of sales.

Fourth-quarter revenues for Waters grew 2.5% to $428.8 million, including 4% and 2% growth from currency transactions and acquisitions, respectively. The loss of three business days negatively impacted revenue by 1%–2%. Organic revenue fell 3%. Products sales rose 2.3% to account for 73% of company sales, led by product introductions, including the Synapse G2 MS system, which recorded revenue of $10–$15 million. Service revenue grew 3.2% to make up 27% of total sales. Waters Division sales climbed 3.4% to $382.4 million. TA Division revenues declined 4.0% to $46.5 million due to lower demand from industrial chemical markets, which accounted for about 15% of company sales. Pharmaceutical sales improved slightly due to higher sales to India and increased sales to CRO and generic firms. However, large pharma sales were modestly lower. Sales to applied markets declined, while government and academic sales were flat. On a currency-neutral basis, sales to the US and Japan climbed 1% and 7%, respectively, while sales to Europe and Asia declined 5% and 3%, respectively. Sales to Asia were negatively impacted by a strong year-over-year comparison as a result of melamine testing requirements in 2008. Adjusted operating income grew 4.3% to $131.4 million, while gross margins improved 146 basis points to 60.3% of sales due to favorable product mix and manufacturing costs.

For the year, Waters’s revenue fell 4.9%, 3% on a currency-neutral basis, to $1,498.7 million, due to weak demand for instrument systems. Product sales declined 7.7% to account for 70% of total sales, while service revenue improved 2.6% to make up 30%. Waters Division sales slipped 4.1% to $1,351.1 million, including a decline of 2% from currency transactions and a positive contribution of 2% growth from acquisitions. TA Division revenue dropped 11.0% to $147.6 million, including 1% growth from acquisitions.

Sales to pharmaceutical and industrial customers declined 4% and 11%, respectively, due to lower demand for instruments. Government and academic sales grew 5%, driven by MS product introductions, increased ACQUITY UPLC sales and government stimulus spending. Sales to Asia (including Japan) improved 1%, while sales to the US, Europe and the rest of the world declined 4%, 9% and 12%, respectively. Adjusted operating income was relatively flat at $405.3 million, while gross profit margins improved 230 basis points to 60.3% of sales due to a shift towards chemistry consumables and service sales, and lower operating expenses. For 2010, sales are forecasted to grow in the mid-single digits, including 1% growth from currency transactions. The company projected a decline in industrial sales, but mid-single digit growth for pharmaceutical sales and double-digit growth for government and academic revenue.

Chart: Calendar Year 2009 Revenue Growth ($US)

Change

PerkinElmer -7.5%

Thermo Fisher (AT) -7.0%

Waters -4.9%

Bio-Rad (LS) -1.9%

Bruker (BSI) -1.1%

Life Technologies 5.0%

Chart: Q4 2009 Revenue Growth ($US)

Varian (SI) -3.0%

PerkinElmer -0.9%

Waters 2.5%

Thermo Fisher Scientific (AT) 4.3%

Agilent Technologies (LS & CA) 11.2%

Bio-Rad (LS) 12.2%

Bruker (BSI) 12.8%

Life Technologies 14.4%

Chart: Q4 CY09 Adj. Op. Profit Growth ($US)

Varian (SI) -31.4%

PerkinElmer -13.1%

Thermo Fisher Scientific (AT) 2.4%

Waters 5.0%

Agilent Technologies (LS & AC) 20.8%

Bio-Rad (LS) 25.2%

Life Technologies 29.8%

Bruker (BSI) 55.0%

Life Technologies FY09 Q4

Life Technologies Revenue ($M) % Rev. Grow. % Org. Grow.

Molecular Biology Systems $422.0 19% 15%

Genetic Systems $234.0 16% 13%

Cell Systems $211.0 6% 4%

Mass Spec. $130.0 14% 7%

Waters FY09 Q4

Waters Div. % Rev. Growth % Segment Rev.

Instrument Systems 4% 56%

Chemistry Consum. 2% 17%

Service 3% 28%

TA

Instrument Systems -6% 76%

Service 3% 24%

PerkinElmer FY09 Q4

Human Health % Total Rev.

Diagnostics 21%

Research 18%

Environmental Health

Lab Services 20%

Environmental 17%

Safety & Security 13%

Industrial 11%