道爾 (DOV) 2009 Q4 法說會逐字稿

Good morning and welcome to the fourth quarter 2009 Dover Corporation earnings conference call. With us today are Bob Livingston, President and Chief Executive Officer of Dover Corporation; Brad Cerepak, Vice President and CFO of Dover Corporation; and Paul Goldberg, Treasurer and Director of Investor Relations of Dover Corporation. After the speakers' opening remarks there will be a question and answer period. (Operator instructions). As a reminder, ladies and gentlemen, this conference call is being recorded and your participation implies consent to our recording of this call. If you do not agree with these terms, please disconnect at this time. Thank you.

I would now like to turn the call over to Mr. Paul Goldberg.

Good morning and welcome to Dover's fourth-quarter earnings call. With me today are Bob Livingston, Dover's President and Chief Executive Officer; and Brad Cerepak, our CFO. Today's call will begin with some comments from Bob and Brad on Dover's fourth-quarter and full-year operating and financial performance and our outlook for 2010. We'll then open the call up to questions. In the interest of time we kindly ask that you limit yourself to one question with a follow-up. Please note that our current earnings release, investor supplement and associated presentation can be found on our website, www.DoverCorporation.com. This call will be available for playback through 11:00 PM, February 12, and the audio portion of this call will be archived on our website for three months. The replay telephone number is 800-642-1687. When accessing the playback, you will need to supply the following reservation code -- 49660424.

Before we get started I'd like to remind everybody that our comments today, which are intended to supplement your understanding of Dover, may contain certain forward-looking statements that are inherently subject to uncertainties. We caution everyone to be guided in their analysis of Dover Corporation by referring to our Form 10-K for a list of factors that could cause our results to differ from those anticipated in any such forward-looking statement. Also, we undertake no obligation to publicly update or revise any forward-looking statements except as required by law.

We would also direct your attention to our website, where considerably more information can be found. And with that, I'd like to turn this call over to Bob.

Thanks, Paul. Good morning, everyone, and thank you for joining us for this morning's conference call. Before we get into our results, I'd like to provide some general comments on our end markets and the current business climate.

I am pleased to report we finished the fourth quarter better than expected across a majority of our companies. Sequentially, order rates continue to be stable or up in virtually all our end markets. Improving trends in Electronic Technologies, energy and product ID were supported by several factors, such as increased demand for a new wave of consumer electronics, modest but steady improvement in the North American rig count, channel restocking and a relatively stable pricing environment.

We are encouraged by the way our business activities have developed the last two quarters and are entering 2010 with expectations of revenue growth across our segments.

With that, let me move to our fourth-quarter and full-year results. Today we reported fourth-quarter earnings per share of $0.55, down 40% from last year. Fourth-quarter revenue was $1.5 billion, down 13% from last year and flat sequentially. Fourth-quarter revenue was stronger than anticipated at Fluid Management and Electronic Technologies, while the revenue seasonality posted in Engineered Systems was as expected. Net earnings from continuing operations were $102 million, down 40%.

For the full year, Dover's revenue was $5.8 billion, down 24% from the prior year and in line with our previously provided guidance. Full-year EPS of $1.99 and earnings from continuing operations of $372 million were down 46%. Bookings for the quarter were $1.6 billion, up 10% over the prior year and up 10% sequentially. I am very pleased to report all segments and platforms posted sequential improvements in order rates, and all segments achieved book-to-bills of greater than 1.

Operating margin for the quarter was 13.1%, down 220 basis points. That said, operating margins sequentially improved at Fluid Management and Industrial Products, resulting from higher volume and the continuing benefits of restructuring actions taken earlier in the year. For the full year operating margin was 12.3%, a 300 basis point decline, but of performance we are pleased with, given the economic environment. I am confident the restructuring actions taken throughout the year have positioned us well as we enter 2010.

In the fourth quarter we generated free cash flow of $211 million or 14% of revenue. For the full year free cash flow was $682 million, 12% of revenue. We continued to invest in strategic target markets, namely product id, energy, fluid solutions, refrigeration and food equipment and communication components. We closed on four strategic add-on acquisitions during the fourth quarter. Barker, Inpro/Seal, A la Cart and Extech, for a total investment of $184 million. These acquisitions fit squarely within our strategy and expand our product offerings in niche growth applications. Our acquisition pipeline remains active as we continue to look for opportunities which complement our existing strong positions in our target markets.

Now let me turn the call over to Brad for comments on our segment performance.

Thanks, Bob; good morning, everyone. I would like to cover our segment performance and then discuss some additional financial information. My comments will focus on quarterly results, while full-year comparisons are in our slide presentation.

Turning to slide five, sequential revenue was up at three of our four segments and five of our six platforms on the strength of our fourth-quarter bookings. Revenue grew 9% sequentially in Fluid Management and 6% in Electronic Technologies, while Industrial Products revenue was up 3%. Engineered Systems revenue was down 9% sequentially, consistent with seasonality normally seen at Hill PHOENIX. From a bookings perspective, fourth-quarter bookings sequentially improved at all four segments and all six platforms. Also of note, December bookings were the strongest month of the quarter.

Turning to slide six, Industrial Products posted fourth-quarter revenue of $408 million and $42 million of earnings. Although these results were down 28% and 29%, respectively, from 2008, this quarter's earnings were the best of the year for Industrial Products. Bookings were $433 million, up 5%, indicating improving trends in most end markets. Industrial Products generated quarterly operating margins of 10.2%, essentially flat with last year, as we continued to see the benefits of our earlier right-sizing actions.

With respect to our Material Handling platform, sales decreased 35% to $166 million in the quarter, while earnings decreased 53%. This resulted in platform margins down about 300 basis points from 2008's results. For the quarter, bookings were $180 million. Though down 13% compared to last year, they were strong sequentially with a book-to-bill of 1.09. We anticipate improving results for several of our businesses in this platform over the next few quarters, however, remain cautious for our construction-related businesses.

With respect to our mobile equipment platform, sales were $242 million in the quarter, down 21% from last year, while earnings declined only 6%. Margins were strong, up 260 basis points. Consistent with the third quarter, margin performance was solid across the platform, capitalizing on aggressive restructuring actions and business integrations. Bookings were $253 million in the quarter, up 24% and also significantly up sequentially. We anticipate solid business conditions for Heil Environmental and our vehicle services group. However, we are not expecting commercial aerospace or trailer markets to recover rapidly.

Turning to slide seven, at Engineered Systems sales were $473 million, up 6% from last year, while segment earnings were down 10% to $48 million. Bookings for the quarter were $487 million, up 17% and up sequentially. The year-over-year growth in revenue and bookings is primarily attributable to the acquisitions of Tyler and Barker, partially offset by end market softness and seasonality.

For the quarter, operating margin was 10.2%, a 140 basis point decline. The margin performance was impacted by the lower volume due to normal seasonality, approximately $3 million of one-time costs associated with acquisitions and roughly $4 million of restructuring charges.

With respect to our product identification platform, we continued to see benefit from the improved demand trends first seen during the second quarter of the year. This is the third consecutive quarter where both revenue and bookings improved sequentially, indicating improved channel dynamics and end market demand. For the quarter, sales were $220 million, up 5%, primarily driven by FX. Year-over-year earnings were up 2%, but margins were down 50 basis points compared to last year. Though still very strong in absolute terms, the reduction in margins was driven by product mix and restructuring costs in the quarter.

We are very pleased with the positioning of our Product ID platform and expect continuing improvements in their end markets, supported by a solid book-to-bill of 1.02. The engineered products platform posted an increase in revenue of 6%, while earnings declined 9% year-over-year. Platform margins declined due to seasonally lower volume, product mix and one-time acquisition costs. With the acquisitions of Parker and Tyler, Hill PHOENIX has built a leading position in the North American refrigeration case market. These acquisitions provided revenue of $43 million in the fourth quarter and $132 million for the year.

Engineered products bookings were $263 million, up 20% over the prior-year period for a book-to-bill of 1.04. We expect Hill PHOENIX and SWEP to show sequential improvement in the first quarter, but generally remain seasonally down. Their results will improve in the second and third quarters, in line with normal seasonal upswings.

Moving to slide eight, at Fluid Management sales declined 19% to $336 million, and earnings were $68 million, a decline of 32%. Bookings were down only 7% from the prior year. Fourth-quarter operating margin was 20.1%, down 400 basis points but strong considering the weakness in demand experienced throughout 2009. For the year operating margin was 20.4%. We began the year with a goal to keep full-year margins in this segment around 19% to 20%, and I am happy to report we exceeded this goal.

We continue to see signs of improving end markets and sequential growth in revenue, earnings and bookings for the last two quarters.

Our energy platform continued to see sequential revenue growth in conjunction with improving North American rig count. However, as was the case in the fourth quarter and will be the case next quarter, year-over-year comparisons in energy are difficult. Fourth-quarter revenue declined 30% to $165 million while earnings were 42% lower. Fourth-quarter margin remained strong but declined 530 basis points from the prior-year period on lower volume and product mix.

Quarterly bookings continued to improve sequentially but were down 16% year-over-year. Book-to-bill was 1.07, reflecting continued momentum in served end markets.

Our fluid solutions platform generated $171 million in the quarter, a decline of 4%. Earnings also declined 4%, yet we held margins. Bookings improved 5% year-over-year to $170 million. We expect this platform to gradually improve during 2010.

Now turning to slide nine, Electronic Technologies continued to see improved end market demand for their communication components and electronic assembly equipment. They also continued to benefit from restructuring activities taken earlier in the year. Fourth-quarter revenue was $292 million, only down 3%. Earnings were $40 million, the high point of 2009. Operating margin was 13.6% for the quarter, driven by higher volume but impacted by roughly $2 million in restructuring costs. Book-to-bill continues to be strong at 1.05.

Our electronic assembly equipment companies continued to see improving order book for the third consecutive quarter, which contrasted with normal seasonality. In fact, order rates were up 26% sequentially in the fourth quarter. We anticipate favorable climate in the electronic assembly markets to continue in the near-term as a new wave of investment seems to be taking hold. The favorable market conditions resulted in a book-to-bill of 1.07 for this group of companies.

Our communication component companies continued to post strong results, benefiting from relative stability in their key military, hearing aid and men's markets and strong operational execution. Bookings continued to be strong in this space with a book-to-bill of 1.03.

Having reviewed the segments, I would now like to briefly provide some additional financial data. Going to slide 10, fourth-quarter net interest expense was $26.8 million. For the full year net interest expense increased 5% to $100 million, primarily reflecting low returns on invested balances. Our net debt to total capitalization was 18.4%, a 650 basis point reduction from year-end 2008, due to strong cash flow and relatively low CapEx and acquisition spending.

Turning to taxes, our fourth-quarter tax rate was 27.2%. For the full year our tax rate was 24.4% and compares favorably to last year's 26.6% rate. The primary driver of our lower full-year tax rate was a relatively large discrete benefit recognized in the second quarter of 2009.

Corporate expenses for the fourth quarter were $29.6 million, essentially flat with last year. Full-year corporate expense was $118 million, a 2% increase over 2008. This increase primarily reflects investments in our supply chain program, cost associated with other scale and leverage activities and increased corporate development costs.

Turning to slide 11, in the fourth quarter restructuring charges were $10 million. For the full year restructuring costs and benefits were $72 million and $125 million, respectively, and in line with our original guidance.

Turning to slide 12, now with respect to guidance, looking at 2010 we estimate full-year organic revenue to be in the range of 4% to 6%. Electronic Technologies should show organic revenue growth in the low double-digit range. Engineered Systems and fluid solutions should be in the overall 4% to 6% range, and we expect Industrial Products to be flat with 2009. We also expect acquisition-related growth to be roughly 3% for transactions completed in 2009. Corporate expense, interest expense and CapEx should all be up versus 2009 as we continue to invest in our businesses, and the tax rate is expected to normalize.

Based on these expectations, we are forecasting 2010 EPS to be in the range of $2.35 to $2.65.

Now let's go to the earnings bridge on slide 13. Volume improvement, product mix and pricing should improve earnings $0.23 to $0.45, while net acquisitions will add about $0.08. All 2009 acquisitions will be accretive to our 2010 EPS. The benefits of restructuring and net productivity includes the absence of $72 million in restructuring charges from 2009, $30 million to $40 million of incremental benefits from those actions less minor 2010 restructuring costs, and includes supply chain, material and other net productivity benefits, which should add $0.40 to $0.48 to 2010 EPS.

Compensation increases will be about a $0.10 headwind as we restore some salaries and benefits. Corporate expense and interest expense will impact EPS $0.04 and $0.03, respectively. Lastly, our normalized tax rate of 29% to 30% will impact EPS $0.17 to $0.19.

Of course, each line item is subject to some level of risk, but we feel confident that we can achieve full-year EPS growth of 18% to 33%.

Now I'd like to turn the call back over to Bob.

Thanks, Brad. With respect to our 2010 guidance, I am more confident today than two to three months ago about our 2010 outlook. The second-half order rates are encouraging and do provide a base for organic revenue growth in 2010. In fact, our revenue guidance is a little bit stronger than the outlook provided at our November investor day.

Aside from the gradual improvement in our end markets, I'm also extremely pleased with the progress we made on several initiatives throughout the year. Those initiatives include our focused M&A program inclusive of our improved post-merger integration processes, our global supply chain initiative, establishment of our China regional headquarters and co-locating our corporate and segment management teams to our new office in Chicago. The benefits of these initiatives have already begun to accrue and will continue to benefit Dover and our shareholders in 2010 and beyond.

I am pleased we undertook these initiatives in 2009, despite the weak global economy. Our leadership teams realized we needed to make some changes to emerge from the downturn a stronger company, and we have. In fact, once we realized the severity of the recession, we set two key financial objectives for 2009 -- achieve full-year double-digit operating margins and 10% free cash flow as a percent of revenue. Full-year operating margin was 12.3%, and free cash flow was 11.8% of revenue. Our leadership teams did a great job executing on these objectives.

In closing, I'd like to take this opportunity to thank all the Dover employees for their hard work and support. Through our collective efforts we have emerged from the recession a stronger company. We are now focused on growth. With that, I'll turn it back to Paul for questions.

Thanks, Bob and Brad, for that summary. At this point I'd like to turn it back to Wes, and Wes, if you can compile the questions. And before you do that, I'd just like to remind everybody, if you can limit your question to one with a follow-up, we'll be better able to serve everybody who wants to ask a question. Thanks.

(Operator instructions) John Inch, Banc of America/Merrill Lynch.

A question about the engineered products business. If I'm not mistaken, Tyler had pretty big share with the big box retailers, and those companies have actually, I think, called out not insignificant ramp-ups in their intended CapEx remodeling, grocery store openings, that sort of thing. I'm curious; post Tyler, have you guys seen any sort of a share shift on the part of those customers? We obviously know who the other competitor is. But have those customers looked and said, well, we can't give you too much business because of Tyler with Hill PHOENIX together? Have you realized that? Or maybe a little color around the expectations on that front.

John, my first comment would be no, we haven't seen the share change or a share mix change. But within that leading comment, you are going to see a little bit of noise from customer to customer. But we actually feel quite positive with the share that we have held of the Tyler business.

Okay, so -- all right, I think that answers that. Bob, your construction businesses, where I think, Brad, you even said that outlook still remains challenged -- what are your thoughts toward the balancing between some sort of a future divestiture in terms of waiting for profitability to potentially come back even though non-res construction still looks challenged in the US, versus maybe thinking about wiping the slate clean with respect to those businesses, particularly given that it wasn't really on your watch that they were acquired? How are you thinking about that?

Well, I think your comment about being on our watch has nothing to do with the decision we make. But to respond to your question, we have made no decision nor do we have anything in the planning for any divestitures in 2010.

Right, but I guess my point is, are you in any way averse to selling businesses that may cyclically be at a bottom -- maybe ex those businesses but cyclically at a bottom versus wanting to refocus Dover I guess is sort of the question?

I think we will work towards refocusing the portfolio of little bit over the -- I call it the medium term, the next two to three years. But don't look for a major shift in 2010 as we deal with the bottom of this market.

You've started all these initiatives from supply chain on down. Do you feel comfortable in terms of the management of the multiple balls that Dover has right now? I'm just curious on that front. How do you balance the concerns that perhaps you've taken on more than you can chew in the short run?

I think 2009 is behind us. I think the initiatives that were introduced in late '08 and during 2009 have started to gain traction, and our focus in 2010 and '11 is on execution. I feel comfortable.

Nigel Coe, Deutsche Bank.

So, Brad, I actually missed you organic growth assumptions by segment. Can you just repeat those, please?

Yes, sure. Let me go back to that. So what we said was -- and this is a little bit of a change from what we said at Dover Day, so we can talk about that a little bit, too. But Electronic Technologies should show organic revenue growth in the low double-digit range. Then we have Engineered Systems and Fluid Solutions within that range, 4% to 6% for the overall Dover company, and we expect Industrial to be flattish with 2009.

And within Industrial, what is the mix between material handling and the other segments?

I would tell you at this point we see both of those platforms being relatively flat, no real difference.

By the way, Paul, that was a clarification not a question.

And then, again, digging into the guidance, what are you assuming for cost flow back assuming 2010? I love industrials. I talk about some of the temporary cost actions put through in 2009 coming back in 2010. How much are you budgeting for that?

Well, what we have -- it's right in the bridge there, in comp and benefits. So we're saying it's about $0.08 to $0.12. So if you pick the midpoint at $0.10, roughly $30 million.

And then, on the book-to-bill ratio of 1.04, typically speaking fourth quarter is a weak book-to-bill quarter for you guys. What does that tell you about 1Q? Does that mean that 1Q is going to be stronger than it normally is relative to fourth quarter?

Well, with respect to the revenue outlook for 2010, we typically do see a seasonally weaker first quarter, a seasonally weaker fourth quarter with I call it the strong shoulders in second and third quarter. You should still expect to see that similar pattern, though the weakness in the first quarter may not be as significant as it has been in the past.

Quickly, just the $0.02 of discontinued in the quarter, what was that?

Related to Triton.

Alex Blanton, Ingalls & Snyder.

I'd like to just address the guidance item of restructuring savings briefly. At $0.40 to $0.48, which is quite a big number in terms of the gain you are forecasting -- and very often, when companies build those things into their guidance, all of it doesn't get realized because competitors are also restructuring, and some of it or all of it winds up being given back to the customers in lower prices. So very often we just don't see those restructuring gains.

So my question is this. Have you built in any safety factor for that in this number? What's the risk that you won't see all of that because there is pricing pressure from competitors who have also restructured?

Well, if you look at the bridge, we deal with the pricing in a separate line than we deal with the restructuring benefits. Alex, the most significant item in the $0.40 to $0.48 for the restructuring line is actually the absence of the restructuring charges that we took in 2009.

Let me interject there -- if you think about the midpoint of that range, $0.36 of the $0.44 at the midpoint is for things already completed in the absence of -- as Bob said, the absence of the cost. That's the predominant share of that line item.

These are cost savings that you expect; am I correct?

These are not only cost savings we expect from completed actions, but also the absence of the $72 million we spent in 2009.

Okay, that has been expensed; that's a very good point. What's that, per share?

That piece is $0.24 per share.

Okay, so it includes the absence of $0.24 of restructuring charges?

Yes.

Good point.

Yes.

Well, let's just hope that you're so strong competitively that even if your competitors cut costs too, they won't be able to force you to reduce prices even more than you expect.

A second question is on the acquisitions. You mentioned four acquisitions, but I don't believe you described them in any detail. Are they bolt-on or standalone? And also, did you mention how much they'll add to sales -- in the quarter, I'm talking quarter?

Well, let me (multiple speakers) of the detail. Actually, I think on three of the four acquisitions we actually issued press releases during the fourth quarter at the time of the acquisition. The largest acquisition was Barker, and that is an add-on to Hill PHOENIX. They are a manufacturer of specialty cases for the grocery stores. The next largest acquisition was Inpro/Seal, which was an add-on acquisition for Waukesha Bearings; they are a manufacturer of isolator technologies for bearing applications in turbo machinery. Two smaller acquisitions were A la Cart, which was an add-on for Unified Brands, and Extech, which was a small add-on for portable printing technology in our Product ID group.

And Alex, what we said was they would provide 3% of our top-line growth in 2010. The way to think about it is the four that Bob was speaking to is about 2 points of that 3, and the other piece being a carryover from Tyler year-over-year.

Robert McCarthy, Robert W. Baird.

Also, as someone asked you to do earlier, I wonder if I could get you to speak to, again, your comments about seasonality expected in Engineered Systems, which I guess we are really talking about the refrigerating case business. I think -- did you really just speak to normal seasonality, low first quarter followed by stronger second and third? Or, was there something more there that I missed?

No -- are you referring to the outlook, or are you referring to the fourth quarter, Bob?

The outlook.

It is quite normal in Hill PHOENIX's business and end market for the fourth quarter and their first quarter to be a little bit light relative to the second and third quarters. We see the normal seasonal upswings in the second and third quarter. We are expecting the same patterns in 2010. It does appear to be a bit more pronounced, but I have to tell you, the reason it may appear that way to the audience is that we have made a rather major investment in the Hill PHOENIX business with a couple of acquisitions to build out their position in that space, and it has become a larger piece of the Engineered Systems portfolio. But look at it as normal seasonality, nothing else.

And are you thinking of that market as one that, like many others, has some pent-up demand in it?

We would like to think so, Bob. Now, the question is, does some of that pent-up demand get released in 2010, or does some of that demand continue to be deferred until 2011?

That's the point of my question, yes.

Well, we're taking a rather conservative approach right now with the outlook, and we've given guidance here on the Engineered Systems revenue for 2010 of organic of about 4% to 5%-6%, within the midpoint of our range.

And from a follow-up I'd like to ask --

But, Bob, let me add one other comment. There's two pieces to the Hill PHOENIX business. One is the remodel; the other is a new store construction. And you have to appreciate that some of this pent-up demand that we may all think exists in the market space truly is tied to commercial construction. And that continues to be -- it was weak in '08, it was weak in '09 and we are taking a similar attitude towards 2010.

It certainly seems appropriate, given the evidence.

And then for my follow-up, I'd like to ask you about your forecast for relatively flat organic growth in mobile equipment, where, as I'm sure you're aware, a lot of your potential customers, anyway, are talking about fairly substantial production increases compared with last year, when they were producing so far below retail demand. In fact, I would think that might be particularly true for the customers at Crenlo.

And so I'm wondering if that forecast is a function of an element that I might not appreciate or if it's a function of having been beaten up so badly in that business that you don't want to count on any growth.

Well, your question was about mobile equipment, but you've referenced a company or two that --

Oh, I'm sorry; I meant material handling.

-- (multiple speakers) platform.

Yes, I meant material handling, thank you.

You make a good point there on mobile equipment. We see some ups and downs within the portfolio. We do have some companies in that portfolio that should see some organic growth as their end markets to recover. We have a couple of drags going into 2010. We do expect our trailer business, our Heil Trailer business to be down. And that is still related to end market demand around the oil and gas part of their business. And, we have some caution in our plan at Sargent with respect to commercial aerospace.

Do you have the ability to get some upside at Heil Trailer from the military, Bob?

That's a very significant part of the product portfolio and customer set at Heil Trailer, and we do enjoy that business. But it is lumpy. We are actually forecasting our military business at Heil Trailer to be even down as well in 2010 -- not significantly, but down as well.

And to my question about as it turns out really was material handling companies?

I understand the point you make. I read the same press and trade articles that you do, Bob, or perhaps some of the same. All I can tell you right now is that we are not seeing an uptick in the material handling businesses that you and I would refer to as construction-related.

Yes, okay; well, good luck, thanks.

Is it there in the second half? May be, but we don't have that visibility right now.

Scott Davis, Morgan Stanley.

I just want to get a sense on what more -- I don't know, maybe quantify or at least directionally talk to what more can be done as far as taking costs out of supplier consolidation and centralizing your corporate functions, things that Brad has really talked about having some potential to do in 2009-2010. Maybe one way to ask it is, what inning are we in, in that, and then any way to quantify it at all as a tailwind or an opportunity?

Let me speak, I guess, specifically to the supply chain initiative. Our targets going into 2010 have not changed from what we shared with you at our investor conference in November or what we shared with the audience on a couple of the calls we had in 2009. We expect to close 2010 with an annualized run rate on, I call it savings capture of $75 million to $100 million. Within our forecast or within our guidance, we have about $0.06 in the EPS guidance from those savings. It's going to be very, very, very much second half of the year. And I will tell you, of the $0.06, the bulk of it may be in the fourth quarter. But our outlook towards that has not changed over the last four or five months.

That's helpful. Is there more to do, though, I guess is kind of my question. The $75 million to $100 million -- I assume that's what's in the plan that has been done and in process right now. But is there -- (multiple speakers)

Well no; let's not call it done. Let's call it initiated.

Okay, initiated, okay.

And it probably -- that savings probably comes from -- I'm going to do -- it's a bit of a guess here, but it's seven or eight what we call spend categories. So there are additional opportunities over the next three to four years, and we look at this as a three- to four-year program.

But specific -- let me just add one piece to that. And it's not directly related, Scott, to your question about more consolidation at the corporate level. But we do have in our guidance, let's say, $8 million to $10 million of incremental restructuring. I would call these normal things we're going to continue to do to take cost out of our businesses and continue to look for efficiencies. So we haven't stopped there. It's just not something that is as big as what we did, given the economy in 2009.

Right. Brad, how would you characterize -- between the spread between low-hanging fruit and structurally difficult stuff to get at, what do you think -- how would you break that down?

You've asked a question of Brad, and I'm going to step in and answer that.

I'm just trying to get a sense of what's easy and what's hard.

I'm going to be real direct with you. I think we've captured the low-hanging fruit. On the restructuring and business combinations and integrations of existing companies within our portfolio, we've captured the low-hanging fruit.

Okay. My last question is just on your average size of deals. You've done a pretty darn good job, I think, in cash reinvestment, and these $50 million kind of deals are interesting. Are there bigger dealers out there, kind of like the Tylers of the world, that you envision for 2010?

Well, let's see. There's two parts to your question. Are there bigger deals out there?

Are there bigger deals that you'll get done, or probability of getting done?

-- (inaudible) there, and we would label a couple of them as been in the pipeline now. But they're more targets than they are responses to offering memorandums. Do you understand the difference?

Yes, sure.

Will a larger deal get done in 2010? I could not sit here and predict that.

(Operator instructions) Shannon O'Callaghan, Barclays.

Just a question around electronic assembly. The book-to-bill is strong. What are your thoughts there heading into early 2010 in terms of the sequential pattern? And then you mentioned a new wave of investment. What is your visibility into the length of this upturn at this point?

We wish we had better visibility than we have, I guess would be the way I would open. But the fourth quarter order rates within the electronic assembly companies were fairly healthy. As we shared with you, they were up 26% sequentially. I can share with you that the pattern here in January has held consistent with the fourth quarter. And I don't mean consistent by it being up 26% consistent at a run rate with the fourth quarter. We believe the order rates for the first quarter could be similar to the fourth quarter.

We are not sitting here expecting 2010 order rates to be up 25% in 2010 over the fourth-quarter run rate. We do, as we've said here in our script, we do see signs that we are in the early days of a new investment wave here in this market space, but I temper that statement by saying, I think it has as much to do with new product launches, maybe even more so, than it does with increased consumer spending. So that would be the tempering comment I would offer, is that I don't think this is really being driven by a huge increase in consumer spending.

When you think about -- this can swing the way your year plays out, because typically that would contribute to some of the seasonality in 1Q. But it sounds like the assembly business might be up sequentially. Are you assuming it stays up or increases from there for the rest of the year, or are you assuming it comes back in the second half or in '11? What's your thinking about -- when you are guiding, what are you assuming for that?

Well, we are not guiding for '11. That's (multiple speakers) --

But for the second half of '10, then.

What you also have to appreciate is, don't look at DET. Don't look at Electronic Technologies as being all electronic assembly or semicon equipment. If you look at the end markets that we serve, the semicon equipment piece of our portfolio we would expect year-over-year to be up better than 20%. Year-over-year -- I'm not talking 2010 over the fourth quarter; I'm saying year-over-year, to be better than 20%.

For the board assembly or let's call it the board assembly and test, that growth rate is going to be more modest, 12% to 15%.

And then you looked at our component businesses, which are the cell phone market, the hearing aid market. The cell phone market may be up 10% in our unit volume for our hearing aid business. That's a rather modest growth rate. It's in the 3% to 5% to 4% to 6% range. You look at the other parts of the component businesses, and it's around military, telecom infrastructure, some industrial applications, 3% or 4%, 5%.

So when you blend it all, as Brad said, low-single digits, I would say the range for the segment, bracketed around 10% to 12%.

Low-double digits? Okay.

Yes, sorry.

Robert McCarthy, Robert W. Baird.

Just for everybody's benefit, could you remind everybody roughly how much of Electronic Technologies is accounted for by the non-component, by the semicon and board businesses?

If you look at the three tech -- or the equipment companies versus the three component companies, Bob, it's roughly a 50-50 split.

I may have missed a couple of these things earlier, I want to make sure I (multiple speakers) --

-- the truthful answer is, probably 60%, 60%-65% components and 35% equipment for 2009.

And, as I was saying, a couple things I'm not sure I got quite right. Did you specifically attribute the change in your organic growth guidance to this segment?

No. If -- you are referring to the change from our guidance at Dover Day versus now?

3% to 5%, up to 4% to 6%, yes.

I would tell you it's around two segments, and we're talking organic growth. It's around Electronic Technologies. It's also around Fluid Management. We did see a stronger business activity in the fourth quarter, especially in our energy portfolio of companies. And we are -- as we enter 2010, we see the fourth quarter activity moving sideways for the next couple of quarters, albeit at a higher rate than we were seeing in the third quarter. So some of the growth is at DFM, some of the growth is at ET.

But coming off Dover Day, think of that as about a point and a half of the growth versus 3 to 5 that we said then. There's also an incremental 1 point of FX now in our organic growth guidance.

That's very helpful, Brad, thank you. And, did I hear specifically a comment about the size of your acquisition pipeline right now?

No.

Well, then, can we get one? And, can you speak to what you are thinking notionally of as an acquisition spend budget for the year?

That's difficult to do, Bob. The only specific guidance I can give you with respect to the pipeline is, we don't anticipate closing on an acquisition in the first quarter. The targets that we're looking at are clearly in the four or five spaces that we identified at Dover Day as the areas that we would like to put to play most of our M&A dollars over the next two or three years. If you look at size of chest, you know, spending chest, so to speak, pick something in the $400 million to $600 million range. And I'm not sitting here predicting that we'll do that.

No, but that's aspirational, right, Bob?

Yes.

Okay. And then I wonder if I -- one more, if I could -- could I get you to talk about

You don't get any questions on the next call, Bob.

Well, if you had more callers in line -- could I get you to talk a little bit about equipment versus consumable trends over the last couple of quarters, specifically the fourth, and how that goes into next year for PID?

Third and fourth quarter -- again, this is specific to Product ID -- third and fourth quarter, we did see more of an increase in equipment sales than we did consumable sales. Consumable sales actually held up fairly well during the first half of '09. And going into 2010, we view it to be rather normal from a historical perspective and that's going to be about 55% consumables and about 45% equipment.

Which is, I gather, another way of saying, you think they are going to grow at about the same pace in the coming quarters?

Yes. We would look at the Product ID expectation of being around the 5% to 6% range.

Okay, thank you very much, Bob.

Thank you very much. That would conclude our conference call for today. We thank you for joining us, and we will speak to you next quarter. Thank you very much.

Thank you. That concludes today's fourth quarter 2009 Dover Corporation earnings conference call. You may now disconnect your lines at this time, and have a wonderful day.