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PerkinElmer Inc. (NYSE:PKI)

Q4 FY07 Earnings Call

January 24, 2001, 5:00 PM ET

Executives

Michael A. Lawless - VP, IR

Gregory L. Summe - Chairman and CEO

Jeffrey D. Capello - Sr. VP and CFO

Robert F. Friel - President and COO

Analysts

Ross Muken - Deutsche Bank Securities

Quintin Lai - Robert W. Baird & Co

Peter Lawson - Thomas Weisel Partners

Derik De Bruin - UBS Securities

Jonathan Groberg - Merrill Lynch

John Sullivan - Leerink Swann

Vivek Qana - Civic Global Healthcare

Craig Leighton - Lord Abbett & Co.

Operator

Good day, ladies and gentlemen. And welcome to the Fourth Quarter 2007 PerkinElmer Earnings Conference Call. My name is Katie and I’ll be your coordinator for today. At this time, all participants will be in a listen-only mode. After the speaker remarks, you will be invited to participate in a question-and-answer session. [Operator Instructions].

I would like to now turn the call over to your host for today is Mr. Mike Lawless, Vice President of Investor Relations. Please proceed.

Michael A. Lawless - Vice President, Investor Relations

Thank you, Katie. Good afternoon, and welcome to the PerkinElmer fourth quarter 2007 earnings conference call.

If you've 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 web cast live and will be archived on our website till February 24, 2007.

Before we begin, we need to remind everyone of the Safe Harbor Statements that we have 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 make 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 the GAAP… to GAAP in that attachment, we will provide reconciliations promptly.

I am now pleased to introduce the Chairman and Chief Executive Officer of PerkinElmer, Greg Summe.

Gregory L. Summe - Chairman and Chief Executive Officer

Thank you, Mike. Good afternoon, everyone. And thank you for joining us on today’s call to discuss our fourth quarter 2007 results. Joining me on the call are Rob Friel, our President and CEO elect, and Jeff Capello, our Chief Financial Officer.

I will begin by reviewing the major highlights of the quarter. Jeff will provide more detail on the financial results and Rob will comment on the outlook for 2008 and after that, the three of us will be available to answer questions and then we will conclude the call.

The fourth quarter was excellent and finishes off a very successful 2007. Furthermore, we believe that we entered 2008 with very good momentum. In the fourth quarter, our revenue increased 20% with revenue growth of 19% in our Life and Analytical Sciences and 22% in Optoelectronics. Our revenue growth in the quarter was led by Medical Imaging, Genetic Screening, Specialty Lighting, Service and Analytical Sciences, all with double digit growth. At 10% this is the highest organic growth since fourth quarter of 2000.

Our adjusted earnings per share were $0.45 which was above our previously forecasted range in consensus expectations. Cash flow from continuing operations was $97 million, up 15% from last year. And these strong results conclude an excellent year of double-digit growth for the company with 2007 revenue up 16% to nearly $1.8 billion, adjusted cash EPS of $1.30, an increase of 13%, even with including the dilution from ViaCell and free cash flow or cash flow from operations less capital expenditures for the year at approximately $160 million. Overall, we are very pleased with the growth momentum of our business and we look forward to a strong 2008.

Let me just turn to a couple of the business highlights. First we completed our acquisition of ViaCell, a leader in the collection processing and preservation of stem cells from umbilical cord blood for future medical use. This acquisition provides us important new capabilities for our genetic screening business, as the therapeutic value of stem cells grows everyday. Additionally, it significantly expands our sales and marketing force OB-GYN professionals, and provides us a direct marketing channel to prospective parents. Integration is going well and we are pleased with our progress.

In late December, we also announced an agreement to acquire the Neonatal Screening Laboratory of Pediatrix Medical. This transaction, which is pending will provide us complementary capabilities to better serve our neonatal customers, the state reference labs. Presently we supply instruments, reagents, software and protocols for neonatal screening. And with the acquisition of Pediatrix… or from Pediatrix we would have laboratory capabilities, which we expect will provide additional benefits to our customers. Including our ability to introduce new screening tests more quickly, offer supplemental tests in addition to state mandated ones and provide back-up testing and supplemental support services.

During the fourth quarter in response to the increased demand for measurement, and air and water quality, food and product safety, and bio-fuel development, our Analytical Sciences business launched the Eco-Analytics initiative. We’ve had excellent market response and expect to build on this progress and continue to do new product introductions and expansion of more application-based solutions such as melamine, protection and food stock.

Our Optoelectronics business had a very good quarter, good acceleration in revenue growth, operating profit and cash flow. In the fourth quarter our growth was led by a record number of shipments in flat-panel digital X-Ray detectors, demand from both diagnostics and therapeutic to customers remained strong, and with the expansion of the footprint of our 80,000 square foot panel fabrication facility now complete we are installing production tools which will serve to eventually double the production capacity in this facility. We expect that capacity to come online throughout 2008 and 2009. With this additional capacity, we will have the opportunity to better serve our existing customers as well as pursue new applications in veterinary and dental and non-destructive testing.

Our Specialty Lighting business saw excellent revenue growth driven by continued adoption of xenon flash modules for mobile camera phones… mobile phone cameras. All of the top five mobile camera manufacturers are now integrating our flash technology into the new generation camera phones, which we expect will translate into more growth in 2008. We believe we are in the early stages of adoption by the camera phone market xenon flash and that the opportunity for us in the marketplace will be significant.

We also have generated good growth in the digital still camera market, where we have had several significant wins with major OEMs.

Finally, as we announced yesterday, the Board of Directors has elected my long-time friend and colleague Rob Friel as President and Chief Executive Officer effective February 1st. Through the past decade, it has been a privilege to lead PerkinElmer and I am very proud of our track record over that time. In my continuing role as Executive Chairman, I look forward to working with the leadership team over the next year as the Company continues its progress. I have great confidence in Rob and the leadership team and I’m certain that PerkinElmer’s best days remain ahead.

I will now turn the call over to Jeff to provide more detail on the financial results.

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

Thank you, Greg, and good afternoon. This afternoon I will provide some details on our revenue, costs and cash flow for the fourth quarter 2007. Then I will provide guidance on 2008, including full year and Q1 ’08 guidance before passing over to Rob Friel for some comments on the health of our businesses.

Before I get into the specifics, I want to clarify that whenever I talk about a particular measure being up or down, I am referring to an increase or decrease in that measure during the fourth quarter 2007 compared to the fourth quarter 2006. And to the extent that I use any non-GAAP measures, those have been reconciled to the comparable GAAP measure in the appendix to the press release on our website.

Turning first to revenue, we finished the fourth quarter of 2007 with sales of $511 million, up 20% compared to $427 million in the fourth quarter of 2006. Foreign exchange and acquisitions each increased sales by approximately 500 basis points.

By segment, revenue growth was 19% in LAS and 22% in Optoelectronics. LAS revenue growth increased by approximately 700 basis points from acquisitions, and approximately 500 basis points from foreign exchange. Foreign exchange increased Optoelectronics sales growth by 300 basis points. The remaining revenue comparisons are presented on a reported basis including the impact of foreign exchange and acquisitions.

Geographically, revenue increased in a strong double digits across all regions with 41% of revenue being the Americas, 38% in Europe and the remaining 21% in Asia. Gross margins for the fourth quarter 2007 were 41.8%, roughly flat compared to fourth quarter of 2006. Adjusted for the impact is stock option amortization expenses and purchase account adjustments related to ViaCell gross margins were also roughly flat year-over-year. Favorable gross margins from ViaCell business, volume leverage for medical imaging business and productivity initiatives were offset by inflation and by growth in our service and lighting businesses, which have lower gross margins, but also lower SG&A expenses.

R&D expenses increased 6% to $28.8 million in the fourth quarter 2007 from $27.1 million in the fourth quarter 2006. Adjusting for the impact to stock option expensing and amortization, R&D expenses as a percentage of sales decreased by 70 basis points due to favorable impact of sales growth and the high level of R&D investment, in the fourth quarter 2006, when we made a conscious decision to increase our R&D funding. Going forward, we expect to R&D spending roughly inline with our growth in sales.

Selling, general and administrative expenses were 24.8% in the fourth quarter 2007, up 27% from the fourth quarter 2006. Adjusted for the impact of stock options, legal settlements and amortization expense, SG&A increased 90 basis points. The increase in SG&A was primarily driven by fixed cost leverage on higher sales and lower SG&A costs of service and lighting being more than offset by the impact of ViaCell acquisition, which carries a relatively high SG&A expense level.

During the quarter, we reported $6.8 million restructuring charge, principally related to redirecting our R&D efforts towards higher growth opportunities and addressing capacity issues in certain product lines. GAAP operating income for the fourth quarter 2007 was $51.1 million compared to $52.2 million in the fourth quarter 2006. Excluding intangibles amortization, stock option expense, purchase accounting adjustments, legal settlements, and restructuring charges, adjusted operating income increased 18% to $75.5 million in Q4 ’07 from $64 million in Q4 ’06. Despite increase investments in ViaCell, other acquisitions, product line rationalizations, and growth initiatives, driven primarily by strong revenue growth. Given the strong revenue growth in revenues and investments made in growth platforms, including acquisitions in 2007, we are very well positioned to drive increased profitability in 2008.

Looking at expenses below operating income, interest expense, net of interest income, Q4 ’07 was $4.1 million as compared to net interest expense of $700,000 in Q4 ’06 due to the increase in debt over the last 12 months to fund our acquisitions and share repurchase initiatives. We also had roughly $1.3 million of other expenses from the impact of foreign exchange in the quarter.

In the fourth quarter 2007, we had tax income of $8.9 million, driven by the favorable settlement of a tax issue in Europe, which generated a benefit of $18.6 million. Without the variable tax settlement, the tax free for the quarter would have been approximately a 100 basis points below our Q4 ’06 forecast of 24.5% due to income being earned in lower tax jurisdictions. We expect our tax rate to be approximately 24.5% or lower during 2008. Depending on the distribution of actual income by tax jurisdiction to another items.

Net income from continuing operations was $54.6 million in Q4 ’07, up from $41.1 million in Q4 ’06. Within the quarter we had a net loss of discontinued operations of $960,000 on the operation of a therapeutic program in the ViaCell business. We are in the process of running a process to divest these programs and expect to conclude this process in the next six months. In addition, we incurred a net loss of $1.1 million associated with a former divested business.

GAAP EPS from continuing operations increased 39% to $0.46 in Q4 ’07 from $0.33 in Q4 ’06. Excluding intangible amortization, stock option expense, legal settlements, purchase accounting adjustments for structuring and a favorable tax audits settlement, adjusted EPS was $0.45 in Q4 ’07, an increase of 15% over $0.39 in Q4 ’06, exceeding both the FirstCall consensus estimate, adjusted stock options expense and our forecasted range of $0.42 to $0.44. Within average diluted shares outstanding for the quarter were 119 million shares reflecting the impact of our year-to-date repurchases, including 1 million shares that we purchased this quarter. We currently have approximately 1.9 million shares remaining under the 10 million share repurchase program, which we expect to begin to execute in 2008.

Turning to our segment results. I will briefly describe our Q4 performance. And LAS revenue for the quarter was $382.1 million, up 19% over the fourth quarter of 2006. On a GAAP basis, LAS operating profits for fourth quarter of 2007 was $40 million compared to $40.9 million from fourth quarter of 2006. Excluding the amortization intangibles, stock option expense, purchase accounting adjustments related to ViaCell, legal settlements from constructing charges, LAS Q4 ’07 operating profits increased 17% to $59.9 million from $51.3 million, despite the impact of integrating ViaCell continued to reposition our product lines. Given the strong growth in revenues and investments made in growth platforms including our acquisitions in 2007, we are very well positioned to drive and increase profitability in this business in 2008. In Genetic screening, which was about 16% of LAS revenue in the quarter, revenue increased in the strong double digits. We continue to see excellent expansion in neonatal screening which grew strong double digits driven by further penetration of our instruments into Mexico and China as well as increasing new analyzed [ph] penetrations such as IRT in the United States.

The ViaCell business grew in strong double digits, driven by increased adoptions for blood storage. Prenatal screening also grew double digit in the current quarter compared to Q4 ’06 driven by both strong double digit growth in NTD and increased adoption of second trimester risk assessment products in both China and across Europe.

Service, which represented about a 23% of our LAS revenue in Q4 ’07 also grew in the strong double digits. We saw good growth in One Source business with our new business in both biopharma and consumer products segments. Within the quarter we also had a strong growth in our lab relocation, validating our service strategy of increasing offerings, value added services to make our customers more productive.

In the analytical sciences product lines which represented about 37% of our LAS revenue in the quarter, revenue increased in the strong double digits driven by very strong performance in our ICP, GC and IR product lines. Strong demand in ICP is being driven by environmental applications for clean air, clean water, the development of new fuel sources and consumer product safety where ICP is the technology of choice and we have a clear leading technology position. Strength in GC is being driven by the expansion of our CLARUS product line which now includes multiple price and performance points and is being very well received in the marketplace. In addition, IR had a very strong quarter with growth in the QA/QC areas of both pharma, food industries, forensics and chemical areas.

Drug discovery sales which represented 23% of LAS revenue in the quarter increased in the double digits compared to the same period 2006. Within drug discovery, certain number of our reagent businesses showed very strong improvements in the year-over-year revenue growth versus Q4 ’06 driven by new product introductions. We saw strong growth in our reagent product lines driven by strong acceptance of our new product introductions in the GPCR, Kinease and biomarker drug target classes with both biochemical and cellular based assays. In addition, we began to see some growth in our RAD reagent product lines from a recent agreement to assume supply of short life reagents to a competitor’s customers. Offsetting strong performance of reagents was some weakness in instrument volume driven principally by order lumpiness and the timing of new product introductions.

In optoelectronics, revenues in the quarter was a $129.4 million, up 22% compared to the fourth quarter 2006 led by our imaging and lighting businesses which both grew in the strong double digits. Optoelectronics GAAP operating profits for the quarter of 2007 was $22.6 million compared to $19.8 million in fourth quarter of ’06. Excluding intangibles amortization, stock option expense and restructuring charges, operating profit increased 28% to $26.2 million in Q4 ’07 from $20.4 million in Q4 ’07 driven by the combination of strong volume and productivity gains.

Within optoelectronics, medical imaging revenue which represents 28% of optoelectronics revenue grew strong double digits during the quarter driven principally by strong demand and operational performance in our Amorphous Digital X-Ray panels. We had a very strong quarter operationally in which we shipped a record number of panels for the facility. In addition, we have now received a majority of the tools required for fab extension which will begin to add productive capacities throughout 2008 which will be very helpful in addressing current unmet customer needs.

Interest revenue, which represents 31% of optoelectronics revenue increased in the low single digits in the quarter. Revenue growth in commercial sensors, photodiodes for screening, thermopiles for air-conditioning were partially offset by contraction in military centers as we continued to transition into new defense programs.

Lighting, which represents 42% of optoelectronics revenue increased in the strong double digits compared to Q4 of last year driven primarily by shipments of our mobile phone class modules and further penetration into the digital camera market. We are continuing to see strong interest in both the camera and the mobile phone markets validating the strength of our leading xenon flash technology.

Now turning to the balance sheet and cash flow, during the fourth quarter of 2007 we had GAAP operating flows from continuing operations of $97 million, which is an increase of 15% over the $84 million in Q4 ’06. Our focus on working capital continues to pay dividends as we achieved working capital turns of 5.8 times in the fourth quarter. In particular, we made strong progress in inventory where we reduced days of inventory by three days year-over-year.

Our continued generation of strong cash flow coupled with a solid balance sheet allowed us to make further progress on multiple initiatives. As noted early in the quarter we closed on our acquisition of ViaCell for a net purchase price of approximately $264 million. We continued our investments in the business spending $9 million in capital expenditures and $28.8 million on R&D. We finished the quarter with total cash of $203 million and net debt which we define as short and long term debt and of cash of $313 million. We currently have a bridge financing facility which we intend to fund with a longer dated piece of capital. The combination of very strong cash flow generation and moderate leverage leaves us very well positioned for 2008 and beyond.

Now turning to the next year, I will briefly discuss 2008 guidance. We expect to build off a strong momentum achieved throughout 2007 as we look forward to 2008. Revenue growth is expected to be in the low double digit to mid-teens driven by strength in our end markets, new product introductions and business development initiatives. We expect total cash EPS growth in the low double digits to mid-teens for the year. Free cash flow is expected to be equal to or greater than cash net income.

For the first quarter of 2008, we expect similar operating results from a revenue and operating profit perspective which would translate into expected EPS, adjusted cash EPS of $0.26 to $0.27 or $0.18 to $0.20 on a GAAP basis.

I would now like to turn the call over to Rob Friel for some comments on the health of our businesses, going forward.

Robert F. Friel - President and Chief Operating Officer

Thank you, Jeff. As we enter 2008, our businesses have good positive momentum and are well positioned to continue to deliver the strong growth on the top line and the bottom line, as Jeff just mentioned. The strength of our franchises and our participation in three key market trends, should continue to create opportunities for us to grow almost irrespective of the overall rate of global GDP growth. These trends are the rising cost of healthcare cost, requiring better predictive diagnostics and more effective therapeutics, the pressure for more testing of food, consumer products and our environment due to increasing health concern and finally, the rapid adoption of flash modules in the camera phones.

The fourth quarter was another strong quarter for genetic screening, as we continue to experience very good market conditions, across virtually every segment of the business, including newborn screening, prenatal and maternal health, molecular diagnostics and now, cord blood. We enter 2008 as a leader in reproductive health with a significantly expanded market reach, scale and breath. This year we expect to continue to growing in the mid to high teens organically, by leveraging expanded channel into the OB-GYN professionals from ViaCell in the prenatal screening market. In the neonatal market, we are excited about the potential to combine the metabolic screening lab from Pediatrix Medical with their existing global capabilities. As well as our new direct marketing channel into expecting parents.

In the maternal screening area, we are growing nicely outside the US and continue work on our PMA for the US market, while across all our products, the international markets still remain under penetrated and represent great opportunities for us.

Our other diagnostic business is medical imaging, which should also grow in the mid to high teens this year. As the end market continues to experience strong growth, due to the conversion of film to digital images. In drug discovery, we believe the market will continue to be challenging this year with large pharma again being under more cost pressures in the biotech firms or the academic lab. However despite this, there will be several areas of growth for us due to investments we have made previously in new products and acquisitions. These should allow the businesses to grow mid-single digits this year. These areas include cell-based assays, particularly our assay reagents focused on kinase and GPCR screening, our assay development service, custom synthesis of radio labeled compounds for use in Admitux [ph] and our cellular imaging for high content screening.

Turning to Analytical Sciences, business growth should continued to be fueled by both increased customer requirements and new regulations in consumer product and food safety testing, environmental monitoring and alternative energy needs. 70% of our revenue in this business is derived from end markets that are impacted by this requirement to increase monitoring. In addition, we continue to strengthen the portfolio with new product introductions and this business benefits from the continued industrialization of the developing world as one-third of the revenue comes from outside the US and Europe.

Our laboratory service business should benefit from an environment where customers facing increasing cost pressures and need to increase scientific output with less staff. As a consolidated service provider, we help our customers which include biopharma, increasing food and consumer product companies to better manage their maintenance costs and improve asset utilization and up time, an offering increasingly more valuable in tough economic conditions.

As Greg mentioned, our photonics business is experiencing excellent demand for its flash modules. Our belief is at the trend towards use of flash in camera phones and the overall demand for these products will not be significantly impacted, if we see a slowing global economic growth. Consequently, we are quite bullish on this business for the foreseeable future.

In summary, we have a lot of positive things going on at PerkinElmer and believe we are positioned well to deliver strong financial results this year. Our strategy this year will be to leverage our strong market positions and capabilities on these favorable end market trends, while continuing to evolve the portfolio to the most attractive market segments through both internal growth and business development activities. We will continue to migrate our offerings from standardized products and services to much more customized applications and solutions which better address the needs of our customers.

In the past few quarters, we have made great strides to accelerate our top line growth. And I am confident these trends are sustainable. I am extremely pleased to have the opportunity to lead PerkinElmer in its next phase of growth. It has been both a great experience and pleasure working with Greg for the past nine years to transform PerkinElmer into what it is today. We are in the best competitive shape that we have been in a long time. We have a great team in place, and I believe the future is very bright.

Now I would like to open the call to your questions.

Question and Answer

Operator

[Operator Instructions]. And you're first question comes from the line of Ross Muken from Deutsche Bank. Please proceed.

Ross Muken - Deutsche Bank Securities

Hi guys.

Robert F. Friel - President and Chief Operating Officer

Hey, Ross.

Ross Muken - Deutsche Bank Securities

Congratulations. Great quarter and congratulations Rob.

Robert F. Friel - President and Chief Operating Officer

Thank you.

Ross Muken - Deutsche Bank Securities

Could you give a little more color specifically on the health sciences businesses on more of the biopharma assets and in some of the… or life science assets, sort of what you saw on a global basis, in terms of demand by geography and just a little more detail sort of, of what you're seeing in each of the customers segments, key customer segments in those geographies?

Robert F. Friel - President and Chief Operating Officer

Okay. Let me start off with that. So, I would say from a product perspective we're clearly seeing more growth on the reagent side than the instrument side and I think this is a function of what you're seeing in the press, with regard to pressure on budget and I think it’s heading particularly to the capital expenditure side of things. I would say it’s clearly more… that problem is clearly more acute on the Pharmaceuticals side than it is on the Biotech or the academic side. So, our approach is to continue to drive new products particularly into the reagent area and I mentioned a couple of those areas particularly our cell-based assays and GPR screening. And we're also seeing a fair amount of interest in this recently introduced product around assay development services as a number of the large pharmas are talking about outsourcing, some aspect of that. I would say geographically we saw much stronger growth in Europe than in America and Asia, which isn’t a significant piece of the business for us, it was also up but not, again it’s not a big portion of the business for us.

Ross Muken - Deutsche Bank Securities

But in terms of the key customer segments, I mean what was driving the European out performance. Was it biopharma related push there or was it environmental?

Robert F. Friel - President and Chief Operating Officer

Well, so, I was just talking about the drug discovery piece.

Ross Muken - Deutsche Bank Securities

Okay.

Robert F. Friel - President and Chief Operating Officer

So it was… so I would say it was driven largely by biopharma, but again I think it’s increasingly harder to sort, of characterize biopharma because it’s almost customer by customer. So, we’ll see certain customer’s increasing their spending… expenditures quite significantly, where other individual pharmaceutical companies would be cutting back fairly severely

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

But it just so worked out for our mix in the first quarter, Europe was much stronger the U.S.

Ross Muken - Deutsche Bank Securities

And in terms of the emerging markets?

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

I’m sorry.

Ross Muken - Deutsche Bank Securities

Emerging markets? As a China, India, et cetera?

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

Yes. I think those continue to grow, in sort of 20% plus area.

Robert F. Friel - President and Chief Operating Officer

But again for us it’s a relatively low base in drug discovery. Now if we move over to the analytical sciences area. I think you're point before was valid and that’s been driven a lot by the environmental, the food and the consumer products monitor, additional monitoring that’s being, seems to be required. And I would say in those businesses we actually saw higher growth in Americas than we did in Europe and we also saw strong growth in Pac Rim.

Ross Muken - Deutsche Bank Securities

Okay. And then, you guys have done a real nice job of accelerating revenue growth via a lot of smaller tuck-in acquisitions. As we turn to 2008 what should we expect from sort of a capital deployment perspective. More small yield any sort of preference to sort of doing possibly a larger deal and how do you think about where you are from a leverage perspective.

Robert F. Friel - President and Chief Operating Officer

So, I would say, as you mentioned, I think we've been pretty happy with the progress we've made on these sort of tuck-insurance, which as you know is adding products, services and technology. So, I would expect us to be… continue to be and use that model, are less inclined to do larger deals. I think from a leverage perspective, as Jeff mentioned we're probably around one times EBITDA now. I think we would probably be comfortable up to probably a little under two times. But I don’t know that we would go significantly beyond that.

Ross Muken - Deutsche Bank Securities

Okay.

Robert F. Friel - President and Chief Operating Officer

And the only thing that I might add to that Ross, would be as I mentioned earlier, we have about a 1.9 million shares left in our…

Ross Muken - Deutsche Bank Securities

Right.

Robert F. Friel - President and Chief Operating Officer

Previously approved program. I would to look to kind of get that done in ’08 and probably at a minimum to keep the share account flat. So, buying any dilution from the impact of employee stock options and employee stock purchase plans, which traditionally is in the 2 million to 2.5 million shares per year. So, at the minimum we’ll do that and we’ll look opportunistically at other share repurchase programs.

Ross Muken - Deutsche Bank Securities

And Jeff, just quickly. There was a little bit disruption on the call from a house keeping perspective. Could you just go through the tax rate again for the quarter?

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

Sure. So, we forecasted overall a 24.5% rate for the year, we came in at about 100 basis points below that.

Ross Muken - Deutsche Bank Securities

Right. But specifically for the quarter was there any comment on the tax for the quarter?

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

Yes. And for the… so, I’m sorry. For the quarter we also kind of foreshadowed 24.5%and we came in 100 basis points below that.

Ross Muken - Deutsche Bank Securities

Okay. And that was on the one timers?

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

No. it’s just on the distribution of income.

Ross Muken - Deutsche Bank Securities

Okay.

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

We tend to earn more income in certain places where we have favorable tax situations we end up with a better rate for the quarter.

Ross Muken - Deutsche Bank Securities

Okay. Perfect. Thanks guys. Congratulations again.

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

Thanks.

Operator

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

Quintin Lai - Robert W. Baird & Co

Good afternoon. Congratulations, on a nice quarter and year-end.

Robert F. Friel - President and Chief Operating Officer

Thanks Quin.

Quintin Lai - Robert W. Baird & Co

As you look at the rest of your industrial pieces not exposed, not part of the regulation or regulatory environment. How cyclical do you see that part of the business and how much visibility do you have right now as you look out into ’08 for those lines?

Robert F. Friel - President and Chief Operating Officer

So, I guess, as we talk really when you say the non-regulatory, you are talking the sort of non-diagnostic based?

Quintin Lai - Robert W. Baird & Co

Well, so when you say that 70% of analytical services--?

Robert F. Friel - President and Chief Operating Officer

Okay.

Quintin Lai - Robert W. Baird & Co

Is due to some type of regulation and monitoring, I assume that the 30% might be tied to maybe some commodity--?

Robert F. Friel - President and Chief Operating Officer

Okay. I understand the question now. So, I would say our insight into that is probably about one quarter out. And while I would say it will be impacted by an economic slowdown, it’s fairly diverse from sort of industry-to-industry. So, we are not really tied to any one specific industry, but I think there could be some variability in that and it will be impacted. But we are generally… our booking are probably in the next quarter.

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

Hey, Quin, I would say that is also reasonably diversified across geography. So, in that business, we are about a third-to-third U.S., Europe, rest of the world. So, it will depends where the economic effect is.

Quintin Lai - Robert W. Baird & Co

All right. So, then what you are saying is that… and then the vast majority of, I guess, of the services… the Analytical Sciences side then isn’t really fond to that cyclicality…well, potential cyclicality.

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

Right, that’s because of the 70% of the side to the other areas.

Quintin Lai - Robert W. Baird & Co

Excellent. And then with respect to your Photonics business, especially your lighting, all of these the cell phones start to adopt xenon modules. Could you talk a little bit about your capacity and your potential to grow that business line?

Gregory L. Summe - Chairman and Chief Executive Officer

Yes, Quin, it’s Greg. So, capacity is relatively easy for us to ramp up. Just to give you some sense, we have then in the flash lighting business for decades. And if you go back five years ago, just as short as five years ago, there was a very high volume that was placed to film based single use cameras. And so, what happened with this shift from film to digital, of course, we had a number of years that are very tough sort of comps as we went through that cycle, with the film dropping down. But we have a fair amount of capacity on the lamp side, as when you go from lamps to modules is really you think about that as leveraging into EMS industry. So, the big contract assemblers are the ones that sort of help put it into the module format. So, I think capacity flexes pretty well.

Quintin Lai - Robert W. Baird & Co

And then my last question, I will jump back in the queue. As you look at your diagnostics franchise, again, it’s just going so well. You are doing well in the neonatal and the prenatal, do you see direct-to-consumer is your next big frontier and along that lines how is the ViaCell integration going?

Robert F. Friel - President and Chief Operating Officer

Of course, I would say the direct-to-consumer is an opportunity for us. I think there is a number of opportunities across the genetic screening business. I think that’s just one of them. I think the combination of that channel we picked up from ViaCell with, hopefully, the closure of the pediatric medical acquisition I think allows us to do some confirmatory testing, some secondary testing. And so, I think that is an opportunity for us, but as I mentioned there is a number of other things that we are looking at. And I would say the ViaCell acquisition seems to be going pretty well. They did have some very good growth during the 245 days we own them in 2007 and they continue to… started 2008 in good shape. So, I think we feel pretty good about that.

Quintin Lai - Robert W. Baird & Co

All right. Thanks. And we would like to both also offer our congratulations and best wishes to both Greg and you as you move on to new roles.

Robert F. Friel - President and Chief Operating Officer

Thanks, Quin.

Gregory L. Summe - Chairman and Chief Executive Officer

Thank you.

Operator

The next question comes from the line of Peter Lawson from Thomas Weisel Partners. Please proceed.

Peter Lawson - Thomas Weisel Partners

Hi. What’s been driving the Optoelectronic business in the Opto margin, is it just volume and is it sustainable?

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

Yes. So, Peter, this is Jeff. So, in a lot of what’s driving that is just pure volume, the mobile phone revenue comes in at operating margin that is favorable to Opto and favorable to all of PerkinElmer, so we get good lift out of that. In addition, the fixed cost nature of the facility, the fab for the amorphous business, medical imaging business is such that when we add all this capacity, the cost is spread over 20 year period, because these are assets that last quite a while and the volumes is ramping up pretty quickly. So, the incremental profitability is quite high, which is going to allow us continue to kind of pushup the profitability Opto as we move forward.

Peter Lawson - Thomas Weisel Partners

And then on the ViaCell business, when do you start to see cross-selling benefits and are there any other products that you are thinking of driving through OB-GYN channel?

Robert F. Friel - President and Chief Operating Officer

Hey, this is Rob. I would say probably middle to the back half of ’08 as we would expect to see some benefit from the cross-selling, there is some training that’s involved. And so, I would say it’s probably not going to be in until sort of mid later’08. And I think we do look at other opportunities across the market to advantage of this very significant channel we have into the OB-GYN professionals. So, I think we will continue to look for additional products in the technology and services we can put through that channel.

Gregory L. Summe - Chairman and Chief Executive Officer

And I think that will be an area of focus from a business development perspective is defined smaller companies that would kind of be nice technology tuck-ins that they don’t have the financial bandwidth to king of forward our sales force that tend to be OB-GYN networks. So, quite intently focused on that.

Peter Lawson - Thomas Weisel Partners

Okay. And finally, we have heard a lot about weakness in the Japanese market. What’s been happening there for you? Could you talk through the trends?

Gregory L. Summe - Chairman and Chief Executive Officer

So, I would say our Japanese business has been soft for quite a number of quarters now, so we haven’t seen a significant change, I would say, more recently because we have been experienced weakness, probably through most of ’07.

Peter Lawson - Thomas Weisel Partners

And is there any chance of pick up. Is there any structural changes that have to be placed?

Gregory L. Summe - Chairman and Chief Executive Officer

Well, I think it is a combination of maybe some softness in the economy as well as some operational improvements that we would need to do in some of our operations in Japan. So, I would say it is a combination of both. It’s hard for me to comment on the economic turnaround but I think we are making some good progress in improving our operations in Japan.

Peter Lawson - Thomas Weisel Partners

Okay. Greg and Rob, congratulations on the real transitions.

Gregory L. Summe - Chairman and Chief Executive Officer

Great. Nice Peter.

Robert F. Friel - President and Chief Operating Officer

Thank you.

Operator

Your next question comes from the line of Derik De Bruin with UBS. Please proceed.

Derik De Bruin - UBS Securities

Hi.

Gregory L. Summe - Chairman and Chief Executive Officer

Hi, Derik.

Operator

Derik. Are you there? One moment. I’m not sure what happened. I am sorry, Derik, if you are on the line I do apologize. I’m not sure what happened. [Operator Instructions]. Okay, sir. You may proceed.

Derik De Bruin - UBS Securities

Okay. Looks like I got lost and stayed there for a minute.

Gregory L. Summe - Chairman and Chief Executive Officer

Yes. Sorry about that.

Derik De Bruin - UBS Securities

Pretty much describes my week. So, what’s your stock options since guidance for the year, 2008?

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

Excuse me.

Derik De Bruin - UBS Securities

For 2008.

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

It will be similar to what it was for this year above $0.05 for full year.

Derik De Bruin - UBS Securities

Okay. And it looks like the corporate costs were a little bit higher than we were expecting. Is there a building for that to start coming down?

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

Yes. I think what your point is that category can kind of… it can move from quarter-to-quarter. We did have kind of some expenses go through there, so should we kind of stepping up our acquisitions program and incretion activity and just timing of kind of benefits. So, I think it was a little higher this quarter, a little lower last quarter but overall should move at a rate slightly lower than the growth of sales.

Derik De Bruin - UBS Securities

Okay. Great. You finished 2007 with basically a flat operating margin, at around 12.7%. You talked about 50 to 75 dips of expansion on an annual basis. What are you targeting 2008? Did we see that coming through this year?

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

No, Derik, this is Jeff. So, I think we do see it come through. I think we found in the fourth quarter that activity in and around ViaCell and some investments that we have made in the fourth quarter that activity in and around ViaCell and some investments that we have made including some product transitions, we would look more heavily on the operating margins. But given the investments we made in the back half of ’06 and ’07, we look we are pretty well positioned. I would suspect we are looking from 50 to 100 for the full year, probably starting a little bit more slowly, probably 50 to 75 for the earlier part, first quarter and maybe into the part of the second quarter. Just because it is going to take us a little while to get to ViaCell cost structure, right size and for the revenue continuing to grow in that business, so it is probably 50 to 75 for the first half and after kind of 50 to 100 range for the back half.

Derik De Bruin - UBS Securities

Great. That’s extremely helpful. I know you moved some of the ViaCell computer programs into operations. Can you talk about your plans on monetization of assets?

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

Sure. We have been actively involved. We have engaged a third party to help us market those assets, both the Via sites that women’s credit preservation fertility product and the USFC research program. That’s in the middle of a divestiture process. We are going to run an auction of assets and it is kind of proceeding according to plan.

Gregory L. Summe - Chairman and Chief Executive Officer

I expect we have a view, an informative view at the end of the first quarter. It’s certainly not at the end of the second quarter, it is kind of outcome of that process.

Derik De Bruin - UBS Securities

Great. And just a couple of final questions. The organic growth rate in Life and Analytical science?

Gregory L. Summe - Chairman and Chief Executive Officer

Organically, we are 7% for the fourth quarter.

Derik De Bruin - UBS Securities

Okay. And the other bit of vision, OE?

Gregory L. Summe - Chairman and Chief Executive Officer

It was 19%.

Derik De Bruin - UBS Securities

Great. And finally the… you have noticed you had some pick ups recent in reagents, kind of kinase assays. I guess, how is this overall market doing in terms of the competitive landscape with the reagents? I am curious about how customers do business here. Is there a lot of share shift going back and forth? What drives new uptake of assays. I am just trying to get a little bit of feel for the dynamics here.

Gregory L. Summe - Chairman and Chief Executive Officer

I think what drives it is, I think what you are seeing in the marketplace is you are moving from what I would say, general re-purpose reagents to much more specific purpose reagents. And so I think we dropped market share is if you have got the right reagent for the particular application, that is been run in the customer. That’s how you win the business and I think what we have been trying to do over the last year is to focus more of our R&D in those reagents and they can very… specific coupled with the acquisition we made of Euroscreen and the collaboration with Axim on flotina [ph] and so we have been trying to build these types of reagents around what we think are the higher growth prospects and so that’s what’s been driving, I believe are our growth and I think we are taking some share in the reagent market as a result of that.

Derik De Bruin - UBS Securities

Okay. That’s from Gilanixis [ph]. Is this the market, I mean considering what the pressures have been from pharma and from discovery, is this market a rapidly growing market. Is it stagnant or share loss going back and forth. I just… how much is pharma biotech spending on I guess new investments and great discoveries particular for the assays business?

Robert F. Friel - President and Chief Operating Officer

I think you have got to separate it from assays and reagents and from instruments. I am of the view that there is still not a lot of increased investment, but only on the instruments side it is more of a replacement and now there are some techniques that they are investing in. So, I think the cellular emitting area is a place where there have been some incremental increased investment but overall I think that is flat, although on the reagent side, just continuing to be screened and done, and I would guess at that sort of a mid single digit growth rate.

Derik De Bruin - UBS Securities

Great. Thanks a lot and best wishes, Greg.

Gregory L. Summe - Chairman and Chief Executive Officer

Thanks Derik.

Operator

Your next question comes from the line of Jon Groberg from Merrill Lynch. Please proceed.

Jonathan Groberg - Merrill Lynch

Good evening. Thanks for taking the call and get the obligatory congratulations out of the way to both the… Greg and Rob.

Gregory L. Summe - Chairman and Chief Executive Officer

Thanks Jon.

Robert F. Friel - President and Chief Operating Officer

Thank you, Jon.

Jonathan Groberg - Merrill Lynch

I just want to make sure since you said something there, so make sure I heard right, Jeff and I was you expect 50 basis points to 100 basis points of operating margin expansion for the year, for 2008?

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

Yes. And I think what I said is more on the line of 50 basis points to 75 basis points in the first half.

Jonathan Groberg - Merrill Lynch

Right.

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

And probably a little more between the back half just by virtue of the fact that we are getting the ViaCell business integrated and working through the cost structure there.

Jonathan Groberg - Merrill Lynch

Right. Just applying the revenue growth rates and that type of operating margin expansion assuming no other acquisitions and as you said keeping short counts hopefully flat you would be… I would have you at a much higher earnings per share level than maybe what you are communicating previously in terms of how dilutive ViaCell would be. Have you got more optimistic in terms of what you are able to do with ViaCell in ’08?

Gregory L. Summe - Chairman and Chief Executive Officer

I think it is still early, in the honeymoon period here with the ViaCell business so, I think we finished 2007 very strong, from the revenue perspective and carry that momentum in 2008, so I would say it’s more come at the back of the existing business. But if you look at the kind of the range of our guidance and what I just communicated I think you will find what we said from the medium term perspective is probably not far off that.

Jonathan Groberg - Merrill Lynch

And then you mentioned just in some of your comments, but no one’s asked about this Lab Services business which I keep finding intriguing given the One Source and the growth that you are having, and no one else really seems to be copying that model too much. And could you just make some comments about that business itself and how that’s developing specifically One Source, I guess?

Robert F. Friel - President and Chief Operating Officer

Yes, this is Rob. So we continue to see a good growth in that business and demand. And I think probably the more exciting aspect is we’re seeing demand outside the biopharma area. Though, in the fourth quarter we actually were able to sign some contracts in the consumer products and food area. So I think it continues to do well for us and we got significant expectations for it in ’08 as well.

Jonathan Groberg - Merrill Lynch

From a margin standpoint, have there been any kind of surprises or shocks as you’ve gone again on that One Source business or --?

Robert F. Friel - President and Chief Operating Officer

No I don’t think so. If you recall, in the second quarter of ’07 we talked about some investments that we are making because of some big contracts that we had won. So the only issue from a margin perspective is sometimes when you win some of these large contracts there is investments required upfront. But our service business operating margins are above the Company average.

Jonathan Groberg - Merrill Lynch

Okay. And could you just remind me, I don’t know if you said this on the call, it was garbled or if maybe you put out a press release I missed, I’m forgetting, but wasn’t there a discontinued operation that you guys have in there?

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

So there is two lines on the P&L, John. One is actually operating the two therapeutic programs of ViaCell. So, the results of that are on the loss from the discontinuing operations line, the first line. And the second line is actually loss and gain… it’s a loss on the disposition of discontinued operations and that is kind of the remnants of a settlement from a previous discontinued operations that happened a little while ago, kind of a one-off event, if you will.

Jonathan Groberg - Merrill Lynch

Okay. And then on the genetic screening in the maternal health, you mentioned you’re still waiting for the PMA on the maternal health side. Any update at all as to when that may come through?

Robert F. Friel - President and Chief Operating Officer

No, I think it still goes through our original schedule, which I think we communicated sort of late ’08, probably in the market, early ’09.

Jonathan Groberg - Merrill Lynch

And just overall, there have been some announcements from some other companies on new types of tests that are being developed and how do you see your competitive position, how do you see new competitors potentially entering and what, what are kind some of the new tests either on the maternal or neonatal side that you guys are working on trying to introduce?

Robert F. Friel - President and Chief Operating Officer

Well, I think we still feel very good about our competitive position, I would say. On the maternal side, our PMA is going to be focused around areas of pre-eclampsia, pre-time birth and intrauterine growth retardation. And a number of other tests, but those are probably the three key ones.

Gregory L. Summe - Chairman and Chief Executive Officer

John, it’s Greg. Some of the other tests that you read about particularly sort of fetal maternal DNA and so forth, I mean some of those are fairly expensive kind of diagnostic tests. And most of what we do is screening and so we have the ability to process samples, a lot of samples in a very cost effective way, it reaches out as opposed to, I’ll call it, more confirmatory type diagnostic test which we do some of, in the spectrogenomics business, CGH rays on chromosomal defects. So I think as we look out and we look out towards the power of having positive indications, basically for protein levels, it’s an existing issue. And the ability to process these very quickly and the fact that this is very accepted over a long period of time in the clinical environment and the fact that the labs are set up to operate this way that there is a sort of, I call it tremendous sort of capability to that system as it is today, is very cost effective. So we don’t see a huge amount of threat. Having said that, we do have technology programs in most of these areas running and looking at these types of approaches which at some point down the road may be viable. And so we are investing in a number of these areas as well. But we see those as kind of longer term practical opportunities.

Jonathan Groberg - Merrill Lynch

So, is it fair to say that on that piece of business your view of the world is that there will continue to be kind of the low cost screening of large numbers of patients and then more of the confirmatory types of tests, but those will be kind of few and far between potentially as opposed to a mass migration unless the costs get down to equal level perhaps but…

Gregory L. Summe - Chairman and Chief Executive Officer

Yes, I mean it has to be a very simple procedure, but I would say, a slight variation on that, John, which is I think the low cost screening is going to continue to expand rapidly. Because, from a public heath standpoint, the cost benefit is very high. And so really, when you look at the penetration around the world, it is very low. As we talked about it on the neonatal side it’s only 25% of the world infants. And out of that 25%, most of them receive only one or possibly two tests, typically TKU. So we think there is tremendous growth within there because it is so cost effective even in developing countries and then you have got the rest of the population to be able to screen. So screening is kind of an early, it is just still an early developing market. And so first you screen and then screen… screening really becomes the indicator for them following up with the diagnostic tests. And I think that’s the only way the economics will work because you can’t really try to run diagnostics tests, it wouldn’t make any sense to run diagnostic tests on a large population sets.

Jonathan Groberg - Merrill Lynch

Okay. And then last, just a very mundane question, Jeff, can you just tell us what your basic shares were, outstanding?

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

Basic at the end of the quarter we are about a 117 million shares.

Jonathan Groberg - Merrill Lynch

Okay. Thanks. Congratulations.

Gregory L. Summe - Chairman, Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of John Sullivan from Leerink Swann. Please proceed.

John Sullivan - Leerink Swann

Hey, guys, good evening.

Gregory L. Summe - Chairman and Chief Executive Officer

Hi John.

John Sullivan - Leerink Swann

Just to follow up on the genetic screen, on the neonatal genetics screening area, at one point I think there was talk about adding a second technology for neonatal screening with a concerned being that maybe some of the emerging parts of the world would be, might not have the expertise ready to operate the mass spectrometry based screening. And you thought that maybe that was an impediment to adoption. Do you still feel that way, is there a second platform being contemplated or how do you intend to approach this issue?

Gregory L. Summe - Chairman and Chief Executive Officer

Well, you know, John, we do it both ways. We do sort of a basic fluorescent immunoassays and then we do multiplexing through tandem mass spec. Maybe what you are referring to is a vision that says, down the road, you may be able to put a much simpler kind of mass spec instrument out there, because a lot of mass specs are really driven by the research marketplace, where there have a lot of different capabilities and in the diagnostics marketplace, it’s just the same measurement over and over. So it’s a much simpler kind of more value based product. So I think there is potential on that front. The technologies really aren’t that expensive, I think, at the end of the day, with the potential that would sort of take the instrumentation cross down.

John Sullivan - Leerink Swann

Okay. So, investors should view the current technology as able to facilitate the growth that you are looking for in some of these emerging markets in neonatal screening.

Gregory L. Summe - Chairman and Chief Executive Officer

Yes.

John Sullivan - Leerink Swann

Okay. Fair enough. And then shifting gears for a second, regarding digital flat channels for X-Ray market, can you just talk for a second about how, how far into that opportunity you feel like we are… how much of that market is turned over from film methods to digital and just kind of give us some sense of, at what point in that opportunity, you feel like you are.

Gregory L. Summe - Chairman and Chief Executive Officer

So I think overall, we are in the early stages of it because, if you think about it today the digital flat panel, digital X-Ray detections are still pretty expensive items. And so really it’s just hitting the high value applications. Over time, as volume grows, kind of back to Jeff’s earlier point, as volume grows, then the cost per unit goes down. So it’s not dissimilar as you think about microprocessor world, depending on, where if the cost went down, they became much more ubiquitous. And so we see that happening. So really it started with sort of high valued medical diagnostics, and then it went sort of opened up in the therapeutics side and then increasingly you find another associated medical, what is veterinarian and dental and then you have the whole non-destructive marketplace, whole non-destructive testing marketplace which I think at the end of the day will be the largest market. Larger than the medical marketplace in that really hasn’t even been touched.

So, one I think there is a lot of room to go in medical and you will see more in kind of… more value based instrumentation, portable instrumentation, a lot of market able to go out there and then you will see this whole unlocking of the non-destructive so, as far as we are in Life and it’s on a lifecycle we think it is very early days.

John Sullivan - Leerink Swann

Is there a competing technology in the non-destructive market that you look at as kind of the current holder of major share and where did your Alactryx have to come down to in terms of price in order to compete well?

Gregory L. Summe - Chairman and Chief Executive Officer

So there are a number of different imaging technologies used today, everything from film, the CCDs to charge couple of devices to number of other capabilities that are out there, so there isn’t one particular magic number. I think what happens is as it continues to come down, we will see it for example in security applications. We don’t see much of it today, right and then you will get into sort of online inspection and part of this is not only sort of the cost per unit but part of it is actually the technical capability. So, non-destructive testing has some of the most challenging requirements because people want to do an online inspection. For example, aircraft parts or engine blocks or something that as they come down the line they want to scan every one of them and you are basically set up a certificate of origin and inspection for that part as it comes through, so I think you will see kind of a higher value product. In the component level we catch it first and then continue to move out through there so you might think… you might see an aerospace easy, you might see a security easy and a number of those more quickly in a number of those applications.

John Sullivan - Leerink Swann

Very helpful. Thank you.

Gregory L. Summe - Chairman, Chief Executive Officer

Yes. You are welcome.

Operator

Your next question comes from the line of Vivek Qana from Civic Global Healthcare. Please proceed.

Vivek Qana - Civic Global Healthcare

Hi, good evening. I just had a question on the margin. How much did ViaCell affect the operating margin on a percentage basis?

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

Somewhere around 50 basis points.

Vivek Qana - Civic Global Healthcare

Okay. Thanks.

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

You are welcome.

Operator

You have a follow up question from the line of Derik De Bruin from UBS. Please proceed.

Derik De Bruin - UBS Securities

Yes. Hi. What’s the… when you look at the net interest expense for 2008, what are you targeting?

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

Well, I think we are in the middle of that right now Derik, in terms of looking at the credit markets, the game plan we currently have a bridge facility in place that will expire in March that we are kind of looking at… taking that bridge facility here with some permanent capital. So, I’ll just give you an idea here and that number probably goes up to somewhere around, somewhere between $25 million and $30 million.

Derik De Bruin - UBS Securities

Okay. That… Okay. Good talk. That kind of I was looking at that… and you've got that other, that other income expense line that kind of fluctuates because of the FX impact and it is, 1315 a general good run rate for that

Jeffrey D. Capello - Senior Vice President and Chief Financial Officer

Yes. It’s somewhere… in some quarters we do better and in some quarters we do a little worse depending on kind of what the currency markets do. but, between 1 and 1.5 the quarter’s probably not bad.

Derik De Bruin - UBS Securities

All right. Thanks.

Gregory L. Summe - Chairman and Chief Executive Officer

You're welcome.

Operator

Your next question comes from the line of Craig Leighton from Lord Abbett, please proceed.

Craig Leighton - Lord Abbett & Co.

Hi, I know it’s getting late so I’ll just two real quick ones.

Gregory L. Summe - Chairman and Chief Executive Officer

No problem.

Craig Leighton - Lord Abbett & Co.

Does the guidance include the pediatrics laboratory acquisition?

Gregory L. Summe - Chairman and Chief Executive Officer

No. It doesn’t at this point, but we expect that to be more or less neutral or near one.

Craig Leighton - Lord Abbett & Co.

Okay. And to close in the first quarter at some point?

Gregory L. Summe - Chairman and Chief Executive Officer

Depends on regulatory approval. But we would hope it would.

Craig Leighton - Lord Abbett & Co.

Okay. Terrific and then, are you still expecting ViaCell to be dilutive by $0.03 to $0.05 next year?

Gregory L. Summe - Chairman and Chief Executive Officer

Yes.

Craig Leighton - Lord Abbett & Co.

Okay. Terrific. That’s all I have. Thanks.

Gregory L. Summe - Chairman and Chief Executive Officer

Okay.

Operator

At this time, we're showing you have no further questions. I would like to turn the call back over to management for closing remarks.

Michael A. Lawless - Vice President, Investor Relations

Great. Okay. Thanks everyone for your participation and interest in PerkinElmer, we appreciate it. We had an excellent fourth quarter and are well positioned to sustain the growth of our business in 2008. This call is adjourned. Have a great evening. Thank you again.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the presentation and you may now disconnect. Good day.

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Source: PerkinElmer, Inc. Q4 2007 Earnings Call Transcript

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