Becton Dickinson and Co (BDX) 2009 Q4 法說會逐字稿

Hello and welcome to BD's fourth fiscal quarter 2009 earnings call. At the request of BD, today's call is being recorded. It will be available for replay through Wednesday, November 11, 2009, on the investors page of the BD.com website or by phone at 800-642-1687 for domestic calls, and area code 706-645-9291 for international calls, using conference ID34687454. (Operator Instructions)

Beginning today's call is Ms. Patricia Spinella, Director of Investor Relations. Ms. Spinella, you may begin.

Thank you. Good morning everyone and thank you for joining us to review our fourth fiscal quarter and year end results. As a recent practice and as we referenced in our press release this morning, we are presenting a set of slides to accompany our remarks on this call. The slide presentation is posted on the Investor Relations page of our website at BD.com. During today's call we will make some forward-looking statements and it's possible that actual results could differ from our expectations. Factors that could cause such differences appear in our fourth fiscal quarter press release and in the MD&A sections of our recent SEC filings. We will also discuss some non-GAAP financial measures with respect to our performance. A reconciliation to GAAP measures can be found in our press release and its related financial schedules. A copy of the release including the financial schedules is posted on the BD.com website. Leading the call this morning is Ed Ludwig, Chairman and Chief Executive Officer. Also joining us are Vince Forlenza, President, David Elkins, Executive Vice President and CFO and BD Executive Vice President, Gary Cohen. Will now turn the call over to Ed.

Thank you, Pat and good morning everyone. Today I'll begin with a brief review of BD's strategy including our strategic focus areas for innovation and growth and our longer term vision. Following my remarks, David will review the results for the fourth quarter, and full fiscal year 2009, as well as provide guidance for fiscal year 2010. Vince will then discuss in greater detail the segment growth drivers and the expectations for fiscal 2010, and after that we'll answer your questions.

Turning to our strategy for growth and future success, our solid results in the face of a challenging economic environment for the year just ended and our longer term outlook continue to validate our confidence that the strategy we have been implementing over the past several years is a sound one and it is being effectively executed by our team. This is the ninth consecutive year in which we've achieved or exceeded our annual objectives. Beginning with slide four, the first thing to say about BD is that we are driven by our purpose, helping all people live healthy lives. The other foundation upon which we build our strategy is our core values. Namely, we treat each other with respect, we do what is right, we always seek to improve and we accept personal responsibility.

Turning to slide five, you will note the first element of our strategy is to increase sustainable revenue growth by designing, manufacturing and marketing innovative products that address significant healthcare problems and deliver demonstrably higher benefits to healthcare workers, patients and researchers. This fundamental growth through innovation strategy is enabled and fueled by the second element of our strategy which is our commitment to achieve outstanding operational excellence, to accelerate our progress and enable us to increase investments in innovation to fuel our growth. Our success will also very importantly continue to drive shareholder value through growth in earnings per share, and the effective use of shareholders' funds.

As you will see in slide six, our strategy is to increase sustainable revenue growth by serving as a global leader in developing and applying technologies to solve emerging, sometimes under appreciated but very important and fundamental healthcare problems. The next slide shows we will do this by enabling the discovery and development of medical therapies, by facilitating faster and more accurate diagnosis to accelerate and improve the treatment of disease, and lastly, by providing unique and affordable devices to safely and effectively deliver drugs and vaccines in developed and developing markets.

On slide eight, we list the four major areas of healthcare and life science improvement in which we direct our efforts. The first is reducing the spread of infection for healthcare workers and patients. We are also advancing global health, which includes safe immunization as well as diagnostics for HIV AIDS and TB. We're also striving to enhance therapy by working with pharma partners in research, production of their drugs and drug delivery. And finally, by improving disease management, with a particular focus on cancer, infectious diseases and diabetes. We believe these four broad areas of healthcare represent exciting revenue growth opportunities for BD that build upon our capabilities.

Slide nine highlights the goals of our strategy and they are to accelerate revenue growth, primarily organically, in the 7% to 9% range. We complement this organic growth by making targeted acquisitions which could enhance key strategic capabilities. Acquisitions of this nature will be strategically obvious and any dilution is expected to be short-lived and modest. The most recent example of this is our recently announced agreement to acquire Handy Lab and Vince will comment on that further later. Our commitment to continuous improvement and operating effectiveness and productivity will also assist us in accelerating our progress by increasing our operating margin. This goes hand in hand with investment in innovation to build the platforms that will enable us to sustain longer term earnings growth in the 10% to 12% range, and enhance our shareholders' value through increasing dividends and share repurchases. BD has been and will continue to strive to be among the highest performing companies in the medical technology industry in top line and bottom line growth, cash flow, and ROIC.

The next slide speaks to our revenue and EPS guidance for fiscal year 2010. Although in 2009 results and our guidance for 2010 are a bit less than our longer term targets of 7% to 9% top line growth and 10% to 12% bottom line growth, we are confident that our strategy and our solid track record of execution will put us back on track. I should point out that our 2010 exchange neutral EPS guidance of 7% to 9% growth includes an unfavorable impact of about 3 percentage points which is equally split between an investment we're making to upgrade our ERP system, Vince will discuss this further in his remarks, as well as an increase in pension expense that reflects a significant year on year unfavorable change to the discount rate. So our guidance of 7% to 9% includes headwind of 3% from these two items. So in summary, we continue to make excellent progress implementing our strategy which drives shareholder value. We are investing to improve and accelerate our pace of progress. By following this course, we're confident that our progress should continue in the years ahead. The future holds many opportunities for BD to support our purpose of helping people live healthy lives. So with that I'll turn the call over to David who will review our financial results for 2009 and give us a first look at 2010 guidance. David?

Thank you, Ed and good morning everybody. I'll start with slide 12. I'd like to highlight some of our fourth quarter results. Revenue came in better than expected at 8.4% currency neutral, reflecting strong Medical and Diagnostics growth, due in part to $55 million of revenue from flu-related products. Medical revenue was driven by strong performance in the Medical surgical and pharm systems business units. Solid Diagnostics revenue growth was driven by Diagnostics systems units which is also benefiting from flu related orders. Biosciences continued to be negatively impacted by funding constraints. Overall we are beginning to see the economic environment stabilize across most of our businesses. We saw solid improvement in operating margins due to SSG&A controls and delivered strong bottom line growth in line with our guidance.

On slide 13, you can see top line growth for the Company for the full fiscal year was slightly over 5%, currency neutral. EPS for the year was $4.95, representing about a 10% currency neutral growth. This solid performance resulted in the Company achieving on an adjusted basis the top end of our EPS guidance range of 12%.

On slide 14 we begin to review revenue by segment. Medical's fourth quarter revenues increased about 8% or 13% excluding unfavorable impact from foreign currency translation. Strong sales of pharmaceutical systems products as expected and solid sales of our Medical Surgical Systems products contributed to the growth. For the total fiscal year, underlying growth was about 6% with about 1% coming from flu-related sales.

Revenues in the Diagnostics segment grew about 5%, or 8% excluding the unfavorable impact from foreign currency translation. Sales of safety engineered devices, cancer diagnostics products and infectious disease testing systems contributed to the growth. For the total fiscal year, underlying growth was about 7%.

In the Biosciences segment, worldwide revenues declined about 5% in the quarter or 4% excluding the unfavorable impact from foreign currency translation. Demand for instruments in the research and clinical segments in the US continued to be impacted by funding constraints. International revenue also continued to moderate. For the full year, underlying growth of our Biosciences business increased about 1.5%.

Next, slide 15 looks at our US and international revenue. In the fourth quarter, BD's US reported revenues increased 6%. US Medical revenues increased about 10% year on year reflecting strong sales of refillable devices, prefilled flush syringes and Nexiva, as well as flu-related products. US sales of Diagnostics products increased about 9%, reflecting strong sales of our Molecular Diagnostics, cancer diagnostics and flu-related products. Biosciences revenue in the US declined 10% reflecting the continued weak demand within the research and clinical instruments due to the funding constraints I mentioned earlier.

Total year reported revenue increased 3% in the US, with Medical increasing about 3.5%, Diagnostics increasing 5%, and Biosciences declining 5%. Reported international revenues in the fourth quarter increased 4% year on year, reflecting 6 percentage point unfavorable impact from foreign currency translation. On a currency neutral basis, underlying growth was about 10%, driven by particularly strong double-digit performance in both Western Europe and Asia-Pacific. Fourth quarter international revenues on a currency neutral basis resulted in underlying growth of about 15% for Medical, driven by strong Med/Surg and pharm systems, 7% for Diagnostics and essentially flat for Biosciences. For the total year, reported international revenues were flat from the prior period, reflecting a 7 percentage point unfavorable impact from foreign currency. On a currency neutral basis, total international revenues increased about 7%, with Medical increasing 7%, Diagnostics increasing 9%, and Biosciences increasing 5.5%.

Moving to global safety, on slide 15, reported sales you grew about 7% in the quarter to $433 million. On a currency neutral basis, underlying growth was about 10%. This was comprised of 8% growth rate in the US, and a strong underlying international growth rate of 13.5%. For the total year, underlying growth was about 9% on a currency neutral basis which is the combination of a 4% growth rate in the US, and continued strong underlying growth rate in international safety of about 17%. Safety in the Medical segment increased about 12% for the fourth quarter, currency neutral, and in Diagnostics segment safety increased about 8% in the quarter, currency neutral. For the total year, Medical Safety increased 8%, and Diagnostics safety increased about 9.5%, both currency neutral. As you can see, safety continues to be a growth driver for the Company in both the US and internationally.

Now turning to slide 17, we look at the components of our fourth quarter year on year revenue growth. Gains from our Medical and Diagnostic business segments along with continued strong international revenue growth drove the underlying performance of 8.4%. These gains were partially offset by the unfavorable currency impact of 4.3% in the quarter, versus the prior year. The foreign currency exchange losses were partially offset by our hedging program, which had a positive impact of 0.6%.

Moving to slide 18, gross margin improved 50 basis points in the fourth quarter, to 51.9%. This was driven by lower raw material costs, primarily resins, offset in part by start-up costs and mix which collectively contributed to a 60 basis point improvement. Hedging gains contributed an additional 30 basis points, while foreign currency translation negatively impacted gross margin by 40 basis points.

Slide 19 recaps the fourth quarter income statement. As discussed earlier, fourth quarter currency neutral revenue growth was 8.4%, with gross profit increasing faster at 9.8% due to our gross margin improvement in the quarter. Moving down the income statement, SSG&A increased about 4% on a currency neutral basis and R&D investment increased 6% currency neutral, which is in line with our full year guidance as we continue to invest in our strategic growth drivers. As a result of our continued operating margin expansion, our operating income and EPS increased over 17% on a currency neutral basis.

The next slide illustrates the degree to which currency has negatively impacted revenues for the year. The 5.4% positive impact from performance and the 1.4% hedge gain, was significantly offset by the 5.6% unfavorable impact for currency for the year.

Now, looking at gross margin on slide 21, for the full year our gross margin improved 130 basis points. This was primarily driven by currency and hedge, underlying margin performance for the year was down about 10 basis points, reflecting the modest favorable raw material costs that were offset by our continued start-up costs and product mix.

Slide 22 recaps the full fiscal year income statement. I'd like to focus on the currency neutral column which details the underlying performance of the business. As we covered earlier, revenue growth was 5.4%, foreign currency neutral. Gross profit growth broadly in line with revenue growth. Strong cost controls within SSG&A held costs within 3%, while enabling continued investment in key sales and marketing initiatives, and R&D increased about 5% currency neutral, as we continued to fund our key development opportunities. As a result of the operating leverage gains and disciplined expense management programs, operating income increased 7.8%, which is faster than our revenue growth and reflects our continued margin improvement. Earnings per share increased 9.7% reflecting operating income growth combined with the benefit of our share repurchase program.

Now, let's move to slide 23. Just to recap the full year. Gross profit margin increased 130 basis points to 52.6%, primarily driven by currency, SSG&A improved 80 basis points to 23.2%, R&D increased 5.7%, and operating income increased 200 basis points to 23.7. All are within guidance that we provided in our July earnings call. The underlying operating income increased 50 basis points on a currency neutral basis and this is consistent with our longer term stated goal. Operating cash flow was $1.7 billion, and capital expenditures were $591 million, also in line with our guidance. I'd like to point out that our Board has authorized the increase of our share repurchases to $550 million, this is consistent with our strategy to drive shareholder value through the effective use of shareholder funds.

Now, going to slide 24, for a review of fiscal year 2009. Our solid underlying revenue growth of 5.4% was driven by four things--strong safety of 9%, international revenue growth of 7%, solid Medical growth at 6%, and Diagnostic growth of 7%. Disciplined expense management drove a 50 basis point improvement in operating margin on a currency neutral basis and we continue to invest in strategic growth opportunities as witnessed by the increase in our R&D spending as well as our announced agreement to acquire Handy Lab. We delivered underlying EPS growth rate of about 10% which is at the high end of our initial guidance of 8% to 10% that we provided in November of last year and as Ed mentioned earlier, this is the ninth consecutive year in which we have achieved or exceeded our objectives.

Now I'd like to move on to fiscal year 2010 guidance, which is slide 25. Before I give you full year guidance and while it's not our policy to provide quarterly guidance, there is one item that I would like to discuss relative to our first quarter fiscal year 2010. I would like to remind everyone of the unusual currency gain we had in the first fiscal quarter of 2009 due to the significant strengthening of the dollar over a very short period of time. This resulted in an unusual EPS gain in the quarter of $0.09. We have been referencing this foreign currency holding gain in our previous calls. This $0.09 holding gain is not anticipated to recur in the first quarter of fiscal year 2010 and, therefore, results in a difficult year on year comparison for that quarter.

Now I'd like to turn to guidance for the full year. We expect revenues to increase about 6% on a reported basis, or between 5% and 6% FX neutral. Earnings per share are expected to increase 1% to 3% over adjusted EPS of $4.95, or 7% to 9% currency neutral, and include any dilution from our Handy Lab acquisition. I would point out that we provided you with a schedule on slide 35 that calls out the major components of the unfavorable 6% impact from foreign currency on our fiscal 2010 growth rate.

We expect our gross profit margin to be in the range of 51.1% to 51.3%, after taking out the effect of foreign currency including hedging, worth about 100 basis points. Our margin is slightly down versus prior year, reflecting higher pension and start-up costs, partially offset by favorable productivity and mix. SSG&A is expected to improve from 23.2% of revenues, to a range of 22.7% to 23% of revenues, reflecting continued strong disciplined expense management. R&D spending is expected to be in the range of 5.6% to 5.7%, providing funds for our key growth initiatives and overall, our operating margin is expected to be in the range of 22.5% to 22.7%.

Operating cash flows are expected to be about $1.7 billion for the full fiscal year. Capital expenditures are expected to decrease to a range of 550 to $575 million. Share repurchases are expected to be about $450 million, and the average number of diluted shares is expected to be about $241 million to $243 million. Thank you. I would now like to turn the call over to Vince for greater detail regarding our business growth drivers and expectations for fiscal year 2010.

Thanks, David. Good morning everyone and thank you for joining us today. The final topics we would like to cover are our revenue guidance by segment and expectations for fiscal year 2010. Before I begin, I would like to provide you with our macro economic assumptions as we look at fiscal year 2010. First, we do not foresee any significant economic change from the present environment. Accordingly, we anticipate little change in US hospital buying patterns and continued difficulties among Eastern Europe countries to fund healthcare initiatives. At the same time, we are assuming a positive impact on Bioscience from the US stimulus program and implementation of an aggressive healthcare stimulus program in China.

Starting with slide 27, as David just said, we expect fiscal 2010 revenues to increase about 5% to 6% FX neutral. We expect safety to continue to be a growth driver. Safety is expected to grow about 7% in the US. International sales of safety devices are expected to grow about 12% to 13%, FX neutral.

Moving to slide 28, BD Medical revenue growth is expected to be about 5% to 6%, FX neutral, driven by continued solid worldwide safety growth, strong growth in pen needles, growth in pandemic supplies for vaccination programs and solid growth of refillable devices. Worldwide medical safety revenues are expected to grow about 9% to 10%, slightly higher than the fiscal 2009 growth of 8%, driven by strong sales of Nexiva and pandemic related safety products. The US is expected to grow about 7% to 8% and international about 17% to 20%, FX neutral.

Diabetes care revenue is expected to grow about 8% to 9%, led by strong emerging market growth of about 18% and continued strong pen needle growth of about 14%, both of which are FX neutral. This estimate includes a 1% to 2% growth coming from new products and a 2% from non-product related revenue, or marketing fees related to a multi-year co-marketing agreement that allows our partner to include their promotional materials with certain BD offerings, thereby leveraging BD's channel and customer knowledge.

Now let me update you with regard to pandemic supplies. In fiscal 2009, actual pandemic revenue numbers for the Medical segment were about $55 million, with Medical Surgical reporting about $30 million, and Pharmaceutical Systems about $25 million. As you may know, in early September, we announced that we had received a significant order from BARDA, the Biomedical Advanced Research and Development Authority, for the purchase of syringes and needles, sharps collectors, and alcohol swabs to be used in national flu pandemic preparedness efforts. Under the terms of the agreement, BARDA is authorized to purchase approximately $52 million of products from BD through March 2010. Very little of fiscal 2009 revenues were related to the BARDA contract.

For fiscal 2010, we expect pandemic revenues in the Medical segment to be about 60 to $65 million. We have lowered our BARDA estimates to about $35 million, as we are still unclear about their needs beyond the first fiscal quarter commitment. All in all, we expect to get a slight increase in revenue growth for Medical in fiscal 2010 from pandemic supplies.

The next slide shows Diagnostics revenue growth is expected to be about 6% to 7% on an FX neutral basis. Similar to BD Medical, solid worldwide safety growth is expected to contribute to top line performance in this segment. TriPath is expected to continue to grow about 10% due to the worldwide expansion of cervical cancer screening programs. GeneOhm is expected to increase about 20% as C-difficile testing gains traction. Lastly, we expect the sales of flu-related products to be about the same as in fiscal 2009.

Slide 30 shows BD Biosciences revenue growth is expected to be about 5% on an FX neutral basis. Growth is expected to come from US stimulus funds, in particular, impacting research instruments. Research reagent growth is expected to come from cell signaling and kit applications as well as stem cell research. We're beginning to see the US academic market return to historical sales levels as endowments improve. Growth is expected to resume for our advanced bioprocessing products now that the inventory reduction program of one of our major customers appears to be completed.

Moving to slide 31, as we look ahead, we expect solid growth in Medical and Diagnostics along with a year on year improvement in Biosciences. We will continue to focus on productivity improvements and disciplined expense management. In line with our core value to always seek to improve, BD is implementing the Everest program, a global enterprise resource planning initiative designed to optimize processes and refresh technology to drive operating effectiveness and improve service to our customers. It will help strengthen, extend and expand our current capabilities. It's a worldwide Company implementation which will allow us to shut off several Legacy Systems. The program will be implemented over a three to four-year period.

The investment in our ERP system and the increase in pension expenses due to the change in the discount rate will have an approximate 3% unfavorable impact to year to year on growth. The underlying growth of the business in fiscal 2010 is 10% to 12%, excluding these items. We are also implementing a global cross-functional business initiative to establish a sustainable low cost competitive advantage for our Medical Surgical Systems business unit that is designed to reduce cost by 20% to 30% for about half of the products manufactured by Med/Surg. We are focused on manufacturing architecture changes, process technology changes, and product design.

The Company will also continue to invest in strategic growth opportunities as we did in fiscal 2009. We are very pleased to have signed an agreement to acquire Handy Lab, our HAI instrument partner. We're making great progress on our next generation instrument. Handy Lab has developed and commercialized a flexible automated platform for performing Molecular Diagnostics which is an ideal complement to our Molecular Diagnostics offering. We believe this new platform enables both our healthcare associated infections offering, as well as future expansion into other Molecular Diagnostics opportunities. Subject to regulatory approval, we expect to close this quarter.

We also continue to invest in both clinical and research instrument and reagent opportunities in BD Biosciences. We believe we have an excellent portfolio of projects that will enable us to take advantage of the bioscience market as it recovers. We believe strongly that we are well positioned to increase our top line growth in the 7% to 9% range and accelerate our bottom line EPS growth in the 10% to 12% range as the global economy recovers. We expect to achieve this through good revenue growth performance in all three segments and all regions, as well as gross margin improvement in SSG&A leverage. Our ongoing investments in growth opportunities along with our continued focus on productivity improvements and disciplined expense management will ensure our future success. Thank you, and we will now open the call to questions.

The floor is now opened for questions. (Operator Instructions) Our first question is coming from Rick Wise with Leerink Swann.

Good morning, everybody. Good morning, Ed.

Good morning, Rick.

Let me start off with the ERP system spend and the impact on gross margin. If I understood, you're saying the pension and the ERP spend was impacting by 3 percentage points. Pension is ongoing. What is the ERP spend done and maybe what do you hope to get out of it after it is done?

Well, I'll take a shot at that. It was an impact really on our bottom line growth. Most of it is going to reside in SSG&A on the ERP and of the 3% headwind, about half of it is ERP and about half of it is an increase in pension expense as a result of this discount rate. You may recall that in 1998, we implemented a program here of SAP which really covered about 40 to 50% of our then-known universe and really got us moving very nicely down the road of homogenizing our systems for global information flow and continuous improvement. Well, it is now 2009 and that system has pretty well run its course, plus the remainder of the Company remains in diverse and non-related systems that have a hard time talking with each other. So the goal of the program, as Vince pointed out, is A, to upgrade the ERP environment from version 4 and change to version 6 and change, and the other part of the program is to get whatever is not SAP of BD into SAP and we've gotten very smart about doing this so I'm not going to be projecting dollars and cents. We have a very strong team based on people who experienced this the first time at BD, people we brought in from other companies and our consulting partners. Overall this will enable us to continue to be confident in our margin expansion commitment, which is in the order of 50 basis points a year, recently, and next year more of that's coming out of SSG&A. Each of our overhead functions, our G&A functions, human resources, finance and IT in particular, have global transformation efforts under way which will result in productivity. So we're very positive about that. And so it's a good investment for the future. But once it ramps up in 2010, we think that that's not going to recur in 2011. So you get to a certain run rate which is a headwind we're experiencing in 2010, after that it gets blended in and we move on from there.

Just the follow-up question. You talked about the long-term ongoing goals of 7% or better top line revenue growth, FX neutral, you're talking about 5% to 6% for 2010. Just big picture, if you want, but what are the factors that are going to drive it back to 7% or better in maybe fiscal 2011 and beyond? Is there a specific program you're thinking about? Is this acquisition-related? Just help us understand, give us a perspective there. Thank you.

It's a very good question and our guidance is organic, first of all, and I think the way you get there, is there's no single program. We're a very diverse Company. All three of our segments, for that matter, all of our businesses are expected to contribute to corporate growth, to cash generation and ROIC improvements. So if you look at how do you get to 7%? If Medical can sustain at 5% to 6%, maybe get a little bit closer to the 7%, we do that through Diabetes Care, through global safety, through international expansion, and through a return to a higher growth from our Pharm systems business. Pharm systems this year, next year in the mid-single digit range, 2011 and beyond we hope it gets more to the higher single digits. First port of call is Medical, sort of goes from 5% to 6% to, say, 6% to 7% over the next couple years. Diagnostics as a result of the growth platforms that Vince described, principally at GeneOhm and TriPath, we're guiding that at 6% to 7%, I think in the out years, it gets into the 7% to 8% range. Again, because of global expansion and safety and Molecular Diagnostics, various plat forms there, and then Biosciences, you know historically years ago, not years ago, last year, 2008 Biosciences grew in the 8% plus range. So again, if we're looking at 11%, plus, if the that gets into the 7%, 8%, 9% range, you mush all that stuff up and you basically do get something that exceeds 7% over our planning horizon, approaching 8% in the not too distant future, 9% is further out. The other thing to point out is that our international businesses, particularly Asia, Latin America, are growing in the teens plus, so we're not optimists by nature here but we're cautiously confident that we can cross that 7% threshold within the next two to three years.

Sound good. Thank you so much.

Our next question comes from the line of David Lewis with Morgan Stanley.

Could you give some macro commentary how you see your business the next three to five years? As you think about the business the next three to five years, do you see where the growth is going to come from, being derived from different segments that we've seen historically? Do you see the Company more reliant on buybacks and do you see acquisitions as more likely? If you could sort of comment on those three dynamics.

The simple answer is no, we're standing on all three pillars of the Company. Now, what has happened, in the immediate term over the last three quarters is that Biosciences has gone from an 8% to 9% grower to next year we're guiding at 5%. This year it ended up at 1%, 1% to 2%. So that is a, we believe, and I'll let Vince elaborate on this, a short-term anomaly and we will begin to see, now getting back to 5% next year is not a full recovery, we think that's more likely to happen in 2011 and 2012. Diagnostics in the 7% plus range is, again, we couldn't do that without our recent acquisitions which supplemented our own Molecular Diagnostics platform, Probe Tec, but 7% is not a new territory for Diagnostics. In Medical, I think people continue to under appreciate, there's a lot of international growth, I'll ask Gary to comment on that. Pharm Systems has been below its historical trend line, and we should get back to that, not next year, necessarily, next year we're looking at more like mid-single digit, but in the year after. Diabetes Care, again, as a result of pen needle conversions and this unfortunate problem epidemologically around the world, can grow 7% plus. So, and Biosciences again, recovering. Let me go back, have Vince comment on Biosciences, how that play out and maybe ask Gary to comment on some hot spots that might be occurring in international.

As Ed mentioned in Biosciences, we are showing a recovery this year but that's a US recovery driven by the stimulus funds, number one. But with still some softness primarily in Europe, in certain countries, and in some other of our international geographies with some good performance in Asia. We think over time that all of that's going to settle out, that the thrust from a market standpoint around cell technologies and in particular stem cell technologies, that we're going to be very well positioned to take advantage of that. So I indicated in my remarks that we are continuing to invest in next generation platforms, which start to come to market around the 2011 time frame, and are going to enable us just like we did with the ARIA and the CANTO, I think to expand that marketplace and drive new applications. So that's around the cell analysis business. Then the Advanced Bioprocessing business, which is now part of Labware, while over this last year it was negatively impacted by inventory reduction and a very large inventory reduction at one of our major customers, who had an issue with one of their drugs. We have a certificate of occupancy for our Miami facility which will be the world's first animal-free, antibiotic-free plant in the media supplement area and ultimately sell cultured media and we're very enthusiastic about what we're hearing from customers around that plant. We see that whole Advanced Bioprocessing business being a second growth driver for the Biosciences business and we expect opening that plant in summertime or so.

And just to fill out the picture, this is Gary. First, we're seeing internationally an increasingly favorable environment for safety growth. At the end of October, you may be aware that the European Commission published a proposed EUI directive that would effectively, if approved by and voted by the council, which we would anticipate, allow for a mandated environment across Europe. And you had asked about over the next two to three years, so we're really looking out over a three year period in terms of the positive effect that would have. That would change the policy environment in Europe in a positive direction. Then as Vince mentioned we're getting really solid growth in emerging markets, very strong growth in 2009 in China, also very strong growth in India. We're anticipating that to continue and we're continuing to invest in those two important countries and the other factor over a three year period are some new product launches that haven't been discussed yet and will be discussed closer to launch but there's some thing in the plan that would aid growth over that three year horizon as well.

Maybe just two quick follow-ups. One, Vince, for you. You quantified flu very directly. In terms of the impact from NIH stimulus and in terms of the impact from China, is there a specific number you could share with us for fiscal 2010?

I don't --

In the number?

On the flu? Hold on.

No, no, just on NIH stimulus and for China.

Oh, NIH stimulus for the bioscience business is going to be in the mid-20s.

Okay. And for Asia-Pacific or China specifically?

Asia-Pacific, the overall region would be low to mid-teens. China was over 20% in 2009, well over 20%, and we're anticipating that type of growth to continue.

And were you asking just on Biosciences? Gary answered for the whole Company. Just to be clear, what you were asking.

Just Biosciences for China.

Double-digit. Well, I don't have it broken out just for China but we do expect strong growth there.

Maybe just one last question, and I'll jump back in queue here. In terms of the cost initiatives in Med/Surg, would you say the recent slowdown in Med/Surg internationally has been more volume driven or do you think it's more price driven?

The headliner for Med/Surg in 2009 is Eastern Europe, Middle East, Africa. Not something we talk about extensively. It's kind of buried in our European numbers, which includes Russia and the Middle East and Eastern Europe in particular. So let's look at Russia, Eastern Europe. That business usually is a teens grower. This year, the Medical piece of the business was down double-digit, year on year, currency neutral, simply because in Russia the currency variations, the dollar strengthening and the local currencies depreciating particularly in the first half of the year, basically shut the business down with our distributors who buy in dollars. So that was the single most negative thing that happened in Med/Surg this year internationally was EMA.

And just one other comment. Just keep in mind on these pandemic revenues that when you look at 2009, the pandemic revenues in Medical were mostly in fourth quarter in the international marketplace and primarily in Europe, so when you think about FY 2010, think that you're going to have that big bow.

Thank you very much.

Our next question comes from the line of Mike Weinstein from JPMorgan.

Hi, guys. It's Kim here for Mike. Just wanted to start off on the guidance, just to make sure that we're looking at it correctly. So the guidance, I'm assuming that we're looking at a range in fiscal 2010 of about $5 to $5.10. Is that what you're trying to convey?

Yes.

Okay. And if we look at the 7% to 9% growth, are we backing into a $4.60 number, so take the $4.95, minus $0.35 in unusual gains, down to $4.60 and grow that 7% to 9%?

In general, yes. Let me ask David to highlight the foreign exchange and analysis that we're actually providing in the deck that may help you think through this somewhat confusing trends in foreign exchange and hedges and things like that.

Kim, as I said in my comments, slide 35 in the deck really goes through and highlights what's going on from an EPS perspective. I mean, you see the adjusted growth rate is 1% to 3%. If you strip out all of the currency which has a negative 6% impact year on year, the underlying growth is 7% to 9%. And what you have to take out, the one-time events that occurred in 2009 which is the hedge gain as well as this holding gain that we talked about, $0.26, and $0.09 for the holding gain, and then also if we look at 2010 we have slight improvement year on year, particularly because the Euro strengthening. But if you recall, we also have forward contract that's we purchased throughout this year on a monthly basis at about $1.36, the average rate for this year, which offset some of that gain. So the net impact year on year from all the currency movement is about $0.28.

Okay. Great. That's helpful. And just a follow-up, looking at 2010 as well. It seems like there's three things that are negatively impacting the earnings which we've talked about the upgraded ERP program, the increase in pension expense, and you mentioned briefly Handy Lab and were you able to quantify what you think the dilution from Handy Lab will be in 2010?

No. I mean, we haven't disclosed the purchase price of Handy Lab. All we say in relation to Handy Lab is that it's minimally dilutive but that is baked into our guidance.

Okay. Great. Thanks, guys.

Your next question comes from the line of Bill Quirk with Piper Jaffray.

Thank you. Good afternoon or good morning, rather. Just want to follow up on the last question on Handy Lab. Initially when you announced that deal we were thinking about a back half 2011 introduction for the BD MAX. Should we continue to think about transitioning the HAI program onto that instrument around that timeframe? Any chance we could get that sooner following completing the acquisition, et cetera?

So this is Vince. I'd love to get it sooner but for the time being, continue to think about it back half of 2011, just as you said, and keep in mind that we have filed for MRSA version four which is the new chemistry on the current platform. So we're going to move ahead during that time frame and continue to improve the work flow, the upfront work flow, so this is chemistry versus beads, takes out a lot of the steps. So we're going to drive that and the C-difficile in the meantime. But I'm sure the team, once the acquisition is closed, keep in mind it's not closed yet, that they'll be looking for every way to accelerate that.

Understood. And then as a follow-up and I guess to get a little specific here on a different segment, on the bioscience guidance, thanks for the $20 million stimulus comment. I guess I noticed in the slide deck, Vince, that the implication here was for the back half of 2010. Is this a shift at all from our initial thinking? And if so, can you just give us a little color around that? Thank you.

No, it's really not a shift from our initial thinking. We've been projecting that looking at how the program's laid out and the specific programs that impacted our customers, that there were two major pieces of the stimulus funding and the piece that's going to hit in FY 2010, we thought that the majority of that would start to hit more around the March, April time frame and so we're consistent with that approach and there may be a second piece that hits in 2011 as well. We haven't quantified that yet.

Thanks very much.

Your next question comes from the line of David Roman with Goldman Sachs.

Good morning and thank you for taking the questions. Just two on the businesses themselves. This is the third quarter in a row we've seen accelerating growth in that US safety business. Could you maybe start by giving us some sense as to what the key drivers there are? Is that new product introduction? Market share? Combination of both? And then I have a follow-up on Biosciences.

US safety, the headline is Nexiva. Bill is out on the road today and maybe Vince has something more to say, but the simplest answer is Nexiva.

Well, just to add to that, Ed's right on target with it is Nexiva and good growth with Nexiva but there was a second piece. We had an older product line called Interlink that was declining and that was offsetting some of the growth that we were getting from Nexiva. And as that decline has abated and Nexiva has gotten bigger, now you're starting to see much more of the impact of Nexiva and you should expect that to continue going forward.

Okay. And then on Biosciences, your closest competitor in flow actually reported a fairly significant acceleration in growth in the most recent quarter, whereas we saw your business decelerate. Is there anything going on from a competitive perspective to note right now or is this all macro related?

So they have announced three new instruments, but have not launched all three. They have just introduced one, as far as I know. So most of what we've seen, the vast majority in our business, is related to the economic environment. Certainly, the competitive situation has slowed down the buying process, because you're going to look at two instruments and just one where there was one alternative before. If any place where we've seen them make any traction is out in Asia-Pacific and some of the tenders out there.

Okay. And then lastly, just looking at gross margins, when you strip out the hedging gains for 2009, looks like on an organic basis gross margins were down sort of an immaterial amount. We look to next year, on an organic basis next year, should we start to see gross margin expansion and is that sustainable, assuming things like resins stay flattish?

This is David. The way to think about margins for next year, we guided to 51.1% to 51.3%. There will be about 100 basis points unfavorable impact from the hedge as well as the currency year on year. As we talked about pension and start-up costs, is about 60 basis points unfavorable and that's going to be offset by productivity and mix improvements. So that's how we got to the guidance range.

And the start-up costs, should those start to cycle down as CapEx starts to come down?

Yes, it will. And remember, these start-up costs are largely driven by our Pharm systems businesses, part of our international expansion where we have a site in Mexico as well as the site in Hungary that are going to be coming online. The Mexico site is already online but there's more capital going in there as part of that expansion effort and also as Vince had said in his comments about the Biosciences business and reagents and cell culture, animal-free, we have a significant site that we're building down in Miami and that's due to come online soon too. So these are three major capital investments that we're making that drive growth for the business. Lastly, in the Medical business you heard Bill talk about our driving costs lower, our ReLoCo Project and there's significant investment going in there. In order to rationalize our assets I'll let Vince elaborate on that.

Just coming back to what I was discussing before, that in terms of productivity, specifically in Med/Surg, we have a program to decrease the cost up to about 50% of those products, the 20% to 30% range. It's a very holistic approach to taking costs down. It's architecture, we talked about the closure of two plants, that's a situation that's ongoing at the moment but it's also product design and packaging design and so we're going to go after this in a very strong fashion and we think we've got a very strong plan to drive gross margin expansion there.

Thank you very much.

Your next question comes from the line of Peter Lawson with Thomas Weisel Partners.

Wonder if you could just kind of talk through the kind of Chinese and emerging market growth and efforts to build out infrastructure there to better capture the international growth and then just on the benefits you may be seeing from stimulus in China and the hospital build-out. Thank you.

Sure, this is Gary. I can provide a little bit more information on that. First, we're seeing growth across all businesses, consistently, solid double-digit growth. Today, a disproportionate amount of our business is in Medical, higher than the Company proportion of Medical is in the mid-60% range and that has been driven by the success of a product that we designed specifically for China, it's a special IV catheter product that's literally transformed the practice of infusion therapy in China which is a very common and popular practice and we have 200 clinical trainers, nurses who go out and have really covered the top tier hospitals in many of the major cities, effectively. They're now transitioning to other cities and it's beginning to transition into the second tier of hospitals. We're also getting very strong growth in Diagnostics and in Biosciences. You may be aware that the government of China has decided to invest to extend healthcare access to 90% of the population over the next three years. And associated with that we're looking on how to expand our presence, particularly our field deployment, to more broadly into the second tier of hospitals where a lot of that expansion will occur. We're very profitable in China, I should mention that as well, at or above total levels of profitability in the Company and in general, in China, we grew in 2009 around 24%, I had mentioned it was strong in the 20s. It was 24% last year. And our revenues are in the range of $180 million but growing very nicely. We have a long-term vision of this being a very, very large country for BD.

Thank you. And just a follow-up on kind of the hospital spending and inventory levels. Can you give us an update there in?

In terms of hospital spending, I was remarking a little bit before, we're not really seeing any big change in hospital buying patterns for our product lines. And we're not anticipating any. We have not seen over the last couple quarters any of the destocking that we were experiencing early in the year. That seems to be well behind us at this point in time. The only business that we continue to see some softness in is in the diagnostic piece of Bioscience, we saw a move toward reagent rental purchasing instead of equipment buying in that business over the last six months or so and we're expecting that to continue.

Okay. Thank you for taking the questions.

Your next question comes from the line of Sara Michelmore with Cowen Group.

Thanks for taking the question. Ed, I just wanted to clarify your comments on the Company trying to return to 7% to 9% growth and I just wasn't clear, is that something that you think you can do in fiscal 2011 or is it a time frame that may take a little bit longer than that? Thanks.

I think the way we see these things evolving, if you build from your base of 10 and that each successive year, order of magnitude might go up somewhere between 50 and 100 basis points of top line growth, so you don't get there overnight, so maybe you go from 5 to 6 and then you go to 6 to 7 and then you go 7 to 8. That's kind of the way our plan evolves over the next three years. You don't get to 9 in three years but you get at a run rate that's north of 7. And you do that again by Medical over this horizon is going to be let's say at or slightly below the Company average as it moves up. So it moves from 5 to 6 to 7, again, driven by the things we talked about. Diagnostics is already rounding in the 7% range and as these new systems come on and all of this is informed also by safety and by global expansion. So Diagnostics moves from low 7s to the high 7s toward 8 and Biosciences perhaps is the biggest turnaround simply because this year was such an unusual down-trend as a result of some of these exogenous factors, these external factors. It goes from 2% this year, FX neutral. Next year we're looking at 5-ish. Then it gets back to 6, 7, 8, closer to 8, 9, as our planning horizon is a three year proper horizon. So you start to see progress. You don't have to wait a long time to see it, you see gradual progress year

Okay, that's really helpful. I guess my follow-up will be on the ReLoCo project you talked about in Med/Surg. Over what time frame should we start to see the benefits of that and I just wanted to get a clarification in terms of the cost reduction. Is this really aimed at improving gross margin or is it also about just being more price competitive in some of these emerging markets? Thanks.

That's a great question. It's actually about both. It makes us both more price competitive. It opens up more of the market for us in some of these international marketplaces and we think we can improve gross margins. So it's all of that. And in terms of the benefits, it's not during this year, it starts to impact in 2011 and 2012, mostly in 2012.

Okay. Great. Thank you so much.

Your next question comes from the line of Kristin Stewart with Credit Suisse.

Thanks for taking the question. Sorry if you addressed this earlier, but just in terms of mix, David, I thought you had said for this quarter's gross margin that mix was a negative. Was that correct? And was that driven just by lower Bioscience or to what extent are some of these flu-related sales lower than corporate average?

It's really driven by the bioscience business that's a high margin business and that declined in the quarter.

Okay. And then just in the -- I guess BD Medical business, are you seeing any incremental pricing pressure or pressure on mix? Some companies have talked about obviously times getting a little bit tougher on the hospital side. Any shift back in terms of maybe not moving to a non-safety device but maybe moving from a third Gen to a second Gen?

We're not seeing anything different than the environment we've been in. We've always been in a competitive environment and that really hasn't changed with what's happened over the last few months, certainly not over this last quarter, no.

Okay. And is pricing within Medical, is that generally positive year to year or are you seeing just downward pressure there?

Pretty much flat.

Okay. And then just in terms of the tax rate, can you just go over again why the tax rate was a little bit higher this quarter and I guess what drives kind of the tax reduction from the current level in 2010?

Our tax rate year on year is flat at the 27.5%, and we had some accruals that we made for valuation allowances against some deferred tax assets, so that's really the basis for that. They are one-time and it's not something that's going to continue.

All right. And just kind of you talked about the opportunities within Europe in terms of conversion to safety engineered devices. Do you have any updates in terms of where some of the major European markets stand today in terms of penetration and where you think that can go with some of the new I guess guidance documents being implemented?

I'll take that. The only country in Europe that has high levels of what we consider to be high levels of transition to safety engineered devices is Spain. After that, Germany would have the next highest level of transition and then after that it sort of breaks out by product category and segment with France having a reasonable transition for blood drawing devices, less so for other devices. On the whole, the continent in Europe is low relative to the US. I would say just to throw out a very general, very round number, if the US is in the 85% to 90% range, Europe would probably be more in the 25% range of transition, 25% to 30%, varying by country. So most of that need is still unfulfilled to transition to safety engineered devices.

This is Ed. By way of emphasis, one of the questions I get when I'm out on the circuit, so-to-speak, and as I read your reports, is the notion that somehow safety has come and gone. Safety grew at 9%, blended, next year we're guiding at about the same range so that's now a $1.6 billion business for us, just to remind you and so that is a not insignificant growth enhancer, above the trend line. And so as we think about future growth, that is one that I would encourage you to continue to think of as having a ways to go and Gary's just talking about safety in Europe, the question was directed in Europe. Safety not only encompasses healthcare worker safety but safety in other parts of the world. Auto disable is also growing in a separate category and we're seeing some of this interest in Japan, in Asia, and in Latin America. So just as a little commercial advertisement for our safety business which I think is under appreciated.

Thanks very much.

Your next question comes from the line of Jon Groberg with Macquarie Capital.

Hi, good morning. Just a few clarification questions since a number have been asked. First, on the currency, still kind of I guess a point of confusion, if you look at slide 34, looks like the net positive impact of currency in 2009 was $0.10 and I'm just trying to reconcile that with saying you have kind of a much tougher comp on slide 35. Can you maybe just clarify that?

If you look at slide 34, you're right, total currency impact is $0.10 which is the effects of the foreign currency translation at $0.16, offset by the hedge gain that we had of $0.26. And that's pretty consistent with what we had guided. What 35 is doing is really showing you the year on year impact. So to fully appreciate the year on year impact you have to understand the one-time effects in 2009 that aren't repeating in 2010 as well as being clear, the hedges that we have in place for 2010 offset some of the gains that you would get from a continual weakening of the dollar and that's why you've got to take both of those in consideration. One is the one-time events that occurred in 2009, and also appreciating the hedges that we have in place for 2010.

What are you assuming? Are you assuming currencies are kind of where they're at today when you give this guidance or when is this as of from a currency standpoint?

This is consistent with how we set our targets and we did that back in September, so we looked at the basket of currencies at that time and broadly used those. We adjusted some of those but broadly we're looking at in the context of September as we're looking at 2010 but as you know, it's anyone's guess on where these currencies are going to wind up going this year.

But that's a helpful clarification. Thanks. And then on resin, what's your assumptions on resin kind of year-over-year, that it stays where it is currently or what's the view on that?

Yes. Essentially, we're assuming that resins are pretty much flat year-over-year, between 2009 and 2010.

On the China, one of the big concerns that people have had about Becton, Dickinson is that some of your products could lend themselves to being copied by lower cost Chinese manufacturers. Within China itself, you said you grew 24%, do you have some sense as to your competitiveness or how fast the market is growing? I know you alluded to huge numbers being thrown out with the build-out in terms of coverage and hospital, with the investment there.

Relative to your second question, our tracking of the market growth in the categories that we compete in is that we outgrew the market in 2009. And then regarding copying, there's no doubt that particularly in China, some other countries as well, they're very adept at copying the products. What they can't copy is our know-how. The way we go to market, the way we train and educate and upgrade clinical practice is an outcome of 100 years of experience in those areas and we're able to take that global knowledge and basically transfer it into our local teams. So they add a lot more value back into the institutions they're working with than just applying the product. That's why we've been able to sustain strong growth even in categories where the products have been copied numerous times.

Is there any chance of institutional barriers, meaning that the Chinese say that hospitals have to use local manufacturers or do you qualify as a local manufacturer?

In the key categories we do qualify as a local manufacturer and we would expect to expand that local manufacturing over time given the size of the country.

One other comment too. I'm agreeing with everything Gary said and just adding that the business has done a fantastic job of continuing to iterate the product and change the product and upgrade the product and that will be a key part of our strategy going forward. We have R&D out in Asia so that we're working very closely with the market so we can turn around things fast.

Just in support of that, we just released this month this safety engineered version of this special catheter designed just for the China market so we should start to see safety growth China.

Last question. Congratulations again on the Handy Lab acquisition. I think that has the potential to be one of the more disruptive Molecular Diagnostic technologies out there. I think they had some other arrangements. Did they have any revenues associated with their business or in terms of other kind of arrangements with other manufacturers, do you plan to keep everything in place or do you plan on making this just a BD proprietary product?

So in terms of significance, there's nothing significant out there in terms of another arrangement. From a strategic standpoint, minimal revenues is what I would say, and they did have some licensing agreements but in terms of where we want to go with the product, we have an open playing field to do that and we're going looking at this as a broad opportunity that BD can capture.

Thanks.

Your next question comes from the line of David Toung with Argus Research.

Yes, thanks for taking my call. On your outlook for the Biosciences, you talked about the recovery. Given the ordering patterns that you are seeing, are you envisioning this to be a more back end loaded fiscal 2010 for that business?

Yes. Keep in mind that they had a very strong first quarter. They grew 10% in 2009 and so we're going to have a tough comp from a year ago. So in fiscal year 2010 you're going to have that tough comp. And then, yes, we do expect the business to be somewhat back end loaded because of the stimulus funding. I'm not saying that we are not getting some stimulus in the first half of the year but we'll see more in the second. That's our current thinking.

Right. Okay. And then moving over to pharmacy, you call that out as a strength in the fourth quarter, given all the restructuring that's going on in the industry, this week J and J announced a major restructuring, how does that all play out in your addressable markets, and also, the movement towards some of this research going to CROs. How does that play out for you?

So that really doesn't have a significant impact for us. What's really driving our business is pharma's pipeline, biotech drugs and vaccines, those are really the two categories. If they're combining organizations, that's not impacting us or the fact that they're working with CROs. You know, we're working with really the people who are putting the drug into production, the tail end of R&D, the development piece of it. But it's all about sales growth for them. So that doesn't really have a significant impact. Gary, you have any other thing to say? Any other questions, operator.

Our last question comes from the line of Jeff Frelick with ThinkEquity.

With respect to you talked about the US stimulus probably hitting in 2010, bulk of it towards the back half. How should we think of Europe as far as a lag with respect to the US market?

Yes, we expect that we're going to continue to see some softness during FY 2010, and probably pretty much in the same geographies. We are expecting some growth in Europe. I'm not indicating that we're not expecting growth. Let me just get the numbers here for you. So Western Europe is going to be up in the low single digits. Approaching 5% or so. Little bit less than the overall business, and we expect that as you get into the following year, you're going to start to see that growth come back.

Okay. Thanks. And then just a quick follow-up. With respect to US safety growth of about call it 7% next year, can you just help us maybe understand a bit more, I might have missed this, but just what's going to drive that, 7% growth next year, kind of get into the current climate in the hospitals, not seeing a big change there yet.

Well, the growth for safety is going to continue to be number one is going to be Nexiva. Two, we are seeing some pandemic-related sales, the pandemic products are safety products and we saw drag along some conventional safety, some non-pandemic related safety products as well. So we're going to see that. But the big driver is going to be Nexiva and that dynamic I was discussing before, where the decrease in Interlink is becoming less of an issue and Nexiva is becoming bigger.

If I could add to what Vince said about the pandemic impact, it's a positive impact in that the one area, the one segment of the US healthcare that had not achieved the same level of transition to safety was the alternate site market, physician offices and clinics, and that's largely because the enforcement agency, which is OSHA, doesn't really reach those segments very often so they were less compelled. But in its planning for the flu pandemic, BARDA, representing the US Government, pursued an approach, an appropriate approach of only procuring and distributing safety engineered devices also as the retail segment, major retail chains that are administering the flu vaccine got more involved and increased their orders, they were doing so for safety engineered devices, so we're seeing this is also a means where we're sort of concentrating safety engineered devices now into segments that weren't using them as much previously and hopefully that will have a lasting impact.

Do you expect Nexiva hospital conversions will be up in '010 over 2009?

Absolutely.

That was our final question. I would now like to turn the floor back over to Mr. Ludwig for closing remarks.

Thank you all for joining us. These were some very good questions. I think you've got the heart of the matter and the heart of the matter is future growth and combined with profitability gets the bottom line percolating. So we hope that we've made the case that we're confident that the top line growth will continue to evolve in a positive direction. Our commitment to operating margin is very strong. We think that's going to be good. And one final thing to remind us all of is that we have performed in the upper end of our peer group over the last several years, in the top line and in the top core tile and the bottom line in shareholder return and very importantly we have returned 70% plus of our free cash flow to shareholders in the form of dividends and share buybacks over a five year interval and we look forward to doing that in the future, so thank you all and we look forward to making good on these commitments for 2010. Signing off.