藝達思 (IEX) 2008 Q2 法說會逐字稿

Good day, and welcome to the IDEX second quarter 2008 earnings results conference call. This call is being recorded.

At this time for opening remarks and introductions, I would like to turn the call to Vice President of Corporate Finance, Mr. Heath Mitts. Please go ahead, sir.

Thank you, Shawn. Good morning, and thank you for joining us for a discussion of the IDEX second quarter 2008 financial results.

Yesterday, we issued a press release outlining our company's financial and operating performance for the three-month period ending June 30th, 2008. The press release, along with the presentation slides to be used with today's webcast can be accessed on our company website at www.idexcorp.com. Joining me today from IDEX management are Larry Kingsley, Chairman and Chief Executive Officer, and Dom Romeo, Vice President and Chief Financial Officer.

The format for our call today is as follows. First, Larry will update you on our overall performance for the quarter across our company and four business segments. Then we will take you through our financial results for the quarter, and Larry will wrap up with the outlook for 2008 and the third quarter. Following our prepared remarks, we'll then open the call for your questions.

If you should need to exit the call for any reason, you may access a complete replay beginning approximately two hours after the call concludes by dialing the toll-free number, 888-203-1112, and entering conference ID, 4450651, or simply log onto our company homepage for the webcast replay. As we begin, a brief reminder. This call may contain certain forward-looking statements that are subject to the Safe Harbor language in today's press release and in IDEX's filings with the Securities and Exchange Commission.

With that, I'll turn the call over to our CEO, Larry Kingsley. Larry?

Thanks, Heath. Good morning.

Another quick summary of operating performance for the quarter. Orders were up 19%. Sales were up 15%. EPS was up 10% to $0.56, and we achieved record free cash flow of $61 million. Our business units performed well. Our acquisitions are contributing to our growth and profitability per our expectations. Overall, we're pleased with our performance for the second quarter.

If you look at Slide 6, as in the past quarters, we've used this slide to summarize our end markets. The top of the chart here depicts our organic capability, our market growth environment, our global position and our business development focus. In the same order as depicted on the chart, our innovation-led organic capability remains strong across the board. We're well positioned in the current economy. Our global position continues to improve. In fact, as we look into the back half of year, one of the reassuring elements to our bullish is the very strong international order activity, particularly from emerging country markets. So we do think that some of the US segments will remain slow or even continue to soften a bit, but that will be more than offset by a strong international order book. Our business development activity has never been better. Our focus to build out fluid metering in health and science is the first priority. The acquisition environment and our deal flow are both good.

I'll walk through the Q2 '08 performance and outlook by segment, starting on Slide 7, fluid metering. Our fluid metering grew 26% in the second quarter with organic growth of 8%. Our outlook for the market is continued strong growth. The global end markets of energy, chemical, petrochemical, water treatment, food and farmer are all healthy. We've launched a number of new products in the quarter, both domestically and globally. I'll focus on a couple that we've already taken orders for, but more importantly those that we think have the potential for major long-term impact. Fluid metering introduced a bulk storage automation system as part of our continued evolution from a pump component offering to full solutions.

Leveraging our Top Tech Software technology and our liquid controlled experience with fuel terminal automation, we're now applying derivative products for other high-value fluid inventory management solutions. The market here includes environmental reclamation, bulk chemical handling and other fluid transfer applications, where inventory verification is becoming increasingly important. In the quarter, we won several new applications for this product. One of the wins is a system for ConocoPhillips to provide automation and remote monitoring capability for verifying the process water removal that is a by-product associated with natural gas wells and natural gas storage facilities. The system provides for validation that the material has been removed, and the corresponding reconciliation that the material has been properly disposed. So the strategy here is to expand the range of bulk plan automation and fluid inventory management products to serve the markets where the regulation of or the value of the fluid inventory requires similar verification.

In fluid metering, we also introduced two new wastewater products in the quarter. The first is a wastewater pump station monitoring system that enables remote monitoring of municipal and industrial pump station events. The new system integration wireless communication with expanded control capability. The system will be used to qualify the needs for infrastructure upgrades, and to ensure that completed upgrades are performing to expectation. The second product, the flow alert, is a wireless remote alarm that is configured as a network measures events anywhere in the infrastructure. So a an example, this product will be applied to immediately recognize change in flow level in a wastewater system to signal malfunction, overflow or other change in status. Both products will be used as part of regulated data logging requirements associated with wastewater environmental compliance.

In fluid metering, we also continue to drive aggressive pump integration through our road map as well. We introduced a stainless steel gear pump for epoxy resin applications. We anticipate that this product will be well-received in international markets. In fact, the first large customer commitment was in China from a printed circuit board material manufacturer. So as a result of both the target new product introductions and our channel expansion overseas, fluid metering continues to grow significantly in Asia and other emerging markets. In the quarter we posted major new customer wins in China, Southeast Asia and the Middle East.

I'm going to turn to health and science now. Our markets are performing well. Total growth was 6% for the quarter, driven by strong performance in analytical instrumentation in the clinical diagnostics and biotech segments. Customer demand for integrated fluidic solutions in health and science continues to grow. Our expanding system solutions capability allows us to help customers design their entire instrument based on our microfluidic experience and our proprietary capability. Again, lots of new component designs that represent very good singles and doubles, but here again, I'll focus on some of the more transformational products.

During the quarter we introduced an integrated pump valve system that supports low flow rate mass spectrometry applications. Mass spec is used to identify physical, chemical and biological properties in various compounds. Our subsystem here is used to enable continuous calibration for sample preparation in process with the mass spec equipment. The user benefit is faster throughput for sample analysis in the lab. Our first commitments for this product have already been placed.

As mentioned, one of the rapidly growing segments here is the biotech industry. Biotech requires microvolume and flow measurement solutions that didn't exist just five years ago. Continually smaller sample sizes and vibration-free operation are increasingly required for microanalysis. So we have worked with some of the leading biotech OEMs to establish a system that is pulseless in operation, and thus it eliminates unwanted interference. Here again, it's the combination of our technologies that enables vibration-free operation at very low volume transfer rates. It's just a few microliters per minute. The benefit for the user is analysis capability by the way of improved accuracy. This system can be scaled for different instrument applications where vibration-free operation is critical to the process. We continue to develop new microfluidics components and subsystems to meet next-generation health and science challenges. So accordingly, obviously we feel very good about core growth here.

In dispensing, on Slide 9, we achieved 14% total growth in the quarter. Organic growth was 3%. Within the segment, the European business, which is roughly 60% of the segment, has experienced modest growth. In North America, given the residential and commercial instruction outlook, we continue to expect small retail channels to remain soft and we're keeping a watchful eye on the timing of the large retail replenishment programs, which are tied to CapEx commitments. So while growth is just slightly lower than previously expected, dispensing remains a strong, global, high-margin, nice cash generating business for us.

As noted in the earnings release earlier this month, we initiated a ceasing of our manufacturing operations within the segment in Milan, Italy. This operational footprint consolidation is part of dispensing's global product road map and capacity utilization strategy. It will generate about $3 million to $4 million of annualized savings. The impact of the resulting restructuring expense, as well as the expected offsetting facility divestiture proceeds, will be discussed with the third quarter earnings release.

I'll move on to fire and safety now, on Slide 10. Total segment sales growth was 6%. The fire and safety segment performed well in the quarter. While the domestic fire suppression market was soft, as we forecasted, our international business performed extremely well. Remember that the segment is comprised of on-vehicle fire suppression equipment, rescue tools and band clamping devices, each of which contribute about 1/3 of the segment sales. For the remainder of '08, we expect continued very strong international markets while the domestic fire suppression market has actually stabilized.

Our rescue tools business continued to expand globally, with major order growth generated from China, Korea, Dubai, the Ukraine, India, markets across South America, and several other emerging country markets. The band clamping business is performing well. We continue to win new business based on our expanding product base of systems that address oil and gas exploration, rig and ship board applications, underwater pipeline installation, and repair and other new infrastructure applications, similar to the fluid metering business. As we continue to expand our customer-base geographically here as well, in May we received our largest single order for band clamping systems, from Europe actually, to be used in deep water, offshore pipeline applications. So again, the three businesses each contribute about 1/3 of the segment sales. In total, we anticipate the overall segment to achieve mid to high single-digit organic growth for the second half of '08, within international growth and rescue tools coupled with global growth in the band clamping business more than offsetting domestic market softness.

So with the understanding of our markets, I'll now go through the Q2 financials. And we're on slide 11. Second quarter orders of $402.2 million increased 19% from last year. By segment, organic order growth as follows. FMT posted an increase of 11% in the second quarter. Health and science was up 1%. Dispensing was down 3% and fire and safety was up 10% in the quarter. Sales increased 15% in total. Organic growth was 5%. By segment, organic sales growth was as follows. FMT posted an increase of 8% in the quarter. Health and science was up 1%. Dispensing was up 3%. Fire and safety was up 2%.

Turning next to operating margin. Reported operating margin at 18.6% was down by 140 basis points from last year. As you can see from the slide, the year-over-year impact was driven by the impact of acquisitions, which is driven by the intangible amortization expenses, that's part of the purchase price accounting; currency impacts, which flow through to op margin at lower rates; and the combination of product mix, higher incentive competence accruals and some selective material price increases, specifically within dispensing. We'll walk through these components by segment here over the next few slides.

Income from continuing - continuing operations was up 10%. EPS was up $0.56. That's 10% higher than last year. That's versus our guidance of $0.53 to $0.56. The second quarter effective tax rate was 34.9%. And again, the full year rate will be in the 34 to 35% range.

Turning next to cash flow. For the second quarter, free cash flow of $60.8 million was an all-time high, AND increased 4% versus last year. For the first half of '08, free cash flow increased 18% to $83 million. As we mentioned in the release for the full year, free cash flow IS expected to exceed net income by 10 to 20%. Within the segment, fluid metering continues to post solid financial results and is really well positioned, as I mentioned. Orders were up 30% in the quarter, 11% on an organic basis. Sales increased 26%, that's 16% from recent acquisitions and 8% on an organic basis. Operating income, nearly $35 million, was a 15% increase from last year. Operating margin of 19.5% was down 190 basis points from Q2 of '07. Excluding the impact of the acquisitions, operating margin was 20.9% or down 50 basis points, and that's largely due to mix within the segment.

Health and science for the quarter. Orders were up 6%. Sales were up 6% as well, and that's 1% organically. As we mentioned in the release, growth in core analytical instrumentation, the IVD and biotech markets as well as acquisitions, drove strong performance in the segment, and operating margin of 18.4% was flat with the prior year.

In dispensing, orders in the quarter were up 8%. Sales increased 14%, organically that was up 3%, as I mentioned. On margin, the 25.3% was down 330 basis points compared to prior year and that was due to the impact of both foreign currency and material price increases.

And then on Slide 18, fire and safety. For the quarter, orders were up 15%. Sales were up 6%. Organic sales up 2%. Operating margin at 24.1% declined 80 basis points compared last year, and that is a mix within this segment.

So I'm going to move on now to our outlook on Slide 19. Our business model is - is working for us. Even in the end markets that are a bit slower, we continue to innovate and drive share gain. While organic growth was solid in almost all regions, our international market growth was excellent and our forecast is for continued strong growth. Productivity is tracking ahead of plans for the year for both labor and material, and while we did see isolated areas of material inflation, we generally offset those with strategic sourcing savings and with isolated price actions. So we'll continue to focus on tight cost controls, process improvement and restructuring for realizing savings where it makes sense.

At the same time, we continue to invest for growth in the markets that have very positive outlooks. The more recently-acquired businesses are performing very well. Integration plans are largely on track with our expectations. Our strategy to increase exposure to the global faster growing infrastructure markets is working, and the new potential acquisition opportunity set now is very good. Again, we'll build on our fluidic strength with the acquisitions that we have planned for the back half of this year.

We're forecasting a growth rate of 13 to 15% for the full year. Organic growth is expected to be between 3 and 5%. Acquisitions will contribute 7%. FX is assumed to contribute 3%. Based on that volume range, we have tightened our EPS estimate to $2.12 to $2.18 for the full year. For Q3 '08, we anticipate total sales growth of 14 to 16%, with organic growth in FMT and fire and safety at the high single digits, and SH - HST, excuse me, and dispensing in the low single digits. We anticipate acquisitions will contribute 7% and FX is assumed to add 3%. Based on this, we estimate the third quarter EPS will be $0.53 to $0.56 per share.

So with that, we'll open the line to questions.

(OPERATOR INSTRUCTIONS)

Our first question comes from Mike Schneider of Robert W. Baird.

Just some questions on the outlook. First, congratulations on a nice quarter. In dispensing, it looks like the total organic growth rate forecast for the year was ticked down by just one point from 4 to 6 to 3 to 5. Is that primarily just a slightly lower outlook on dispensing?

It is, Mike. Basically we're assuming we're going to continue to see relatively soft domestic market spend out of the smaller retailers, and that some of the CapEx programs with the larger retailers may push a bit as well. So that's - that's built into the slightly lower organic assumptions for the full year.

And those larger CapEx programs, have you actually seen project delays yet or are you just being conservative and anticipating them based on the market?

No, we have seen some delays.

Okay, and then the margin in dispensing, you mentioned raw materials hit you seemingly quite hard this quarter. What pricing actions have you taken and should we see the benefit of those in the second half?

First maybe an across-company comment. First we actually did, in the quarter, realize both the cross-mitigation actions as well as selective price actions that essentially offset material on a cross-company basis. Within dispensing, sheet steel was the primary culprit, where we saw a fair amount of increase that we couldn't recover, which generated a portion of that 330 basis point year-over-year delta. The back half of the year, we'll probably recover some of that, again both cost but also a little bit of price. On a company-wide basis, we feel very comfortable that we're in good shape relative to material margins based on the actions that are already in place.

Okay. And just on the other side, so acquisitions, it looks like you actually took your forecast up a bit. What acquisition is driving the growth? Is that Isotech or just a collection of them?

ADS, as you know we acquired right at the turn of the year, continues to perform well. So yes, there's a little bit of an improved outlook there, so with our wastewater segment.

Okay, thank you. I'll get back in line.

Okay, Mike.

Our next question comes from Matt Summerville with KeyBanc.

A couple of questions. First, can you talk about the mix you encountered in FSD during the quarter? As I recall, I thought BAND-IT and the rescue tool businesses tended to carry higher margins, where maybe suppression was lower than segment average?

Matt, that's a correct statement. Actually we've seen the benefit of that last quarter and a couple quarters prior. The - the issue within fire and safety was really mixed within the three components this quarter where we - we didn't see a strong margin contribution from the two that are typically a little bit higher. However, I would tell you that we don't think that that's part of a trend rate. As a matter of fact, as we look into the order book, I think we'll see a - a nice contribution as a function of mix as we look in the back half.

And then just a follow-on to Mike's question, have you actually put in place a price increase in dispensing for the back half of the year? Has something been announced to the marketplace?

There really are not price book actions within dispensing. Dispensing is project-by-project pricing environment. So there really isn't a phenomena of, "take the price book up by X percent." So no, the answer within that specific product segment, there isn't an action that's cross-segment that would be similar to what you'd see in some of the other businesses. All that said, we typically do see price opportunity as a function of where we have material cost increases. So on a project-specific basis, we'll reflect those costs as to how we think about the pricing specific to the opportunity.

Based on some of the design wins, you've had new products coming to market. I guess as we look out several quarters with respect to HST, do you anticipate as we move into next year a pretty meaningful reacceleration in organic growth in this business relative to what you've seen the last few quarters in IDS? Just trying to gauge your level of confidence there?

Yes, the short answer is yes. The core growth in HST which is, as we all know, displacing some of the opportunistic OEM work that we've been sunsetting through the course of the year, is extremely strong. With the assumption that those markets stay reasonably sound, I think we'll see very nice growth on an HST segment basis.

And just one more of FSD, and I'll get back in line. Can you talk about what you saw domestically with respect to rescue tools and fire suppression? Just maybe a little more detail behind the numbers there? And then the suppression business, as I recall, has easier comps in the back half of the year, and I guess do you anticipate further degradation on those easier comps?

As you remember, when we question talked two quarters ago about our expectations for the domestic suppression business being down the first half and then essentially sequentially flat at the back half, I think that's still the order of the day. We're anticipating that the US fire suppression market is fairly stable at this point. We're seeing, you know, pretty healthy order rates out of most of the truck OEMs now, and we'll watch it closely, but we don't expect that we're going to see sequential degradation. So yes, relative to easier comps on suppression, we should see some nice growth opportunities. Rescue tools is benefiting from very strong international growth and from a number of markets that, frankly, we haven't participated in historically. So we - we anticipate that rescue tools will do well, all up globally for the back half.

Great, thanks, Larry.

And Matt, that - by the way, excuse me, our third quarter guidance where Larry mentioned it, FSD is expected to have a high single-digit growth rate for the quarter.

Got you, thank you.

Your next question comes from Ned Armstrong with FBR Capital Markets.

Thank you, good morning.

Hi, Ned.

You've done a nice job of BAND-IT, in expanding into new markets there, you know, particularly the the oil and gas I know has been very helpful to that unit's performance. Can you just go through some other applications that you're looking at that may not have really booked a lot of revenue yet, but hold promising prospects?

BAND-IT, Ned, is the tale of a very diverse application set, as you know, and the BAND-IT team applies both the combination of the IDEX tools and even a couple of BAND-IT specific tools to how to they go about understanding where their product offers a differentiated and improved benefit to the customer. They've done over the last year, I would tell just you, a phenomenal job in analyzing and grounding, winning new business, where we're now, as you've - I think you've heard us talk a bit about how we're doing banding applications for assisting in jacketing insulation in a process-controlled environment, we're doing a lot of things that are associated with harsh atmosphere environment applications that are in manufacturing and process in general. We've got some other on-vehicle applications, that we're not going to talk specifically about for market-competitive reasons, that will generate nice volume in the months to come. But the BAND-IT business, if you look at the revenue breakdown, is the product of hundreds of applications, and a good chunk of those are growing nicely. So it's not in any way dependent on upstream energy down all applications or sub-C pipeline applications alone. But those are certainly noteworthy right now, given the nice volume that we're seeing there.

Okay, good. Thank you.

Sure.

Our next question comes from Ajay Kejriwal of Goldman Sachs.

Good morning, gentlemen. Maybe a couple of detailed questions to start with. If you could give us the flow through to the operating income from Forex for the quarter, please?

Excuse me, Ajay, from what?

Forex translation, what was the flow through to the operating income line?

Sure.

Ajay, maybe the best place to start, let's go back to Slide 12 and let us walk you through how we bridge out margin. If you look at the op margin at 18.6 as reported, acquisitions due to amortization of intangibles was about a 60 basis point impact. If you look at FX, that's a bit of a theoretical calculation, but currency, at the current rate of 3%-plus percent of growth, doesn't flow through at the 18.6%, so it had about a 20 basis point impact year-over-year versus the 20% from last year. As Larry mentioned, the 70 basis points on the slide is a combination of mix, also higher incentive compensation accruals and some selective material price increases. That 70 basis points is about $3 million dollars. Each of those impacts was about $1 million each. So the short answer is, flow through ex those items is well above kind of our company average as expected from the price of the cost initiatives, but when you exclude FX and obviously acquisitions and that 70 basis points from mix, incentive comp and material price, obviously you get the flow through. So this quarter - it's a bit of a long-winded answer, the flow through has been achieved but you have to look at the impacts of those buckets.

So just so I understand this, flow through on account of Forex is mid single-digit?

Yes, somewhere in there range. Again, it varies by country, but if you look at versus the 18.6%, it's the way we look at margin rate, it had about a 20 basis point reduction in our margin year-over-year.

Got it. Great. Maybe if you have that readily available, growth by geography, for you know, FMT and dispensing?

We had not intended to go through that. My comments were essentially as far as I could go, but basically strong international growth, Ajay, great growth in Asia. Double digit emerging market growth. Solid European growth, and then not far trailing was our all-up aggregate domestic growth.

So you did see growth in FMT in the US, but would it be fair to say it was positive but maybe below segment average?

Mid single-digit.

Mid single-digit. Okay, good. Moving to dispensing, and you've talked about restructuring in the past, but maybe if you could help us understand and provide background on why the need to resize the capacity now? Is it you're seeing lower growth in Europe or is it some other secular trend?

No, it's - really, Ajay, it's the function of both the long-term thinking for what we want to do globally with the product line. You've probably heard us talk a bit about our global road map and our global scalable footprint for dispensing, which allows us a fair amount of manufacturing flexibility, where we make the product against a global design, modular in mechanical structure as well as the power structure of the product. When we looked at the gains on productivity globally, and the opportunities we have going forward, coupled with the fact that we don't think we'll need that capacity short term, this was an appropriate action to be taken. So it's really consistent with our capacity utilization thinking, our road map thinking, and then obviously it's going to be a fairly nice benefit for us in the first full year. Great pay back.

Great. And maybe lastly, coming back to that pricing raw material question I asked earlier, would you be able to provide the dollar amount of raw material headwinds in the first half or for the quarter?

Well, depends, not to be snide, but it depends how you think about headwinds, because we really did offset all but - what was it, about $1.8 million or so, Dom?

Price on the sales side was 2% for the quarter.

So if you solve for, if you want to think about the P&L price first, 2%, which has been a pretty consistent number for us quarter-on-quarter, year-on-year, then cross-mitigating actions essentially across the company, other than sheet steel, where we did take a little bit of an increase in the quarter and also we saw some pig iron associated increase in some of the areas where there are consumers for pig iron for castings.

So was raw material inflation above that 2%? Because you got pricing and then you've got some productivity as well, right?

Ajay, only within dispensing is where we called out the delta, which is about the $1 million impact for the selected material costs within dispensing. All the other units offset cost with the actions on global sourcing and/or price.

Got it. And your full-year estimate assumes pricing offsetting - more than offsetting raw material inflation?

That's correct.

Great, thank you.

Yes. Thank you.

Our next question comes from Amit Daryanani with RBC Capital Markets.

Just had a quick question. Organic [auto] growth of 7% is obviously impressive, given some tough comps you had. Is there any way to slice it based on different geographies? Do you have the numbers?

Again, we're not going to go there right now in terms of how we look at it by geography. The short answer, though, just to maybe help you feel good about it, it was reasonably strong across the globe.

Already, maybe if I just look at the dispensing side, I think you guys said Europe is about 60% of the business there, North America is 40%. It sounds like Europe seems to be holding in pretty well right now, while North America is softening up. Just given all the macro environment data that is coming out of Europe, it sounds like that's starting to slow down now, just the way North America did a few quarters ago. Why the conviction and the confidence Europe's going to keep holding in on the dispensing side going forward?

Well, Europe has been a fairly stable growth element to dispensing for multiple years now. We've got fairly decent line of sight to the project activity there, and the case of Europe with the paint companies are planning to spend. So we don't have huge growth baked in, as you can tell here by the way we've looked at the back half of the year for dispensing. I think we're just saying for dispensing we're expecting flat to modest growth, and that Europe will be stronger than North America. The emerging markets also, though, are growing nicely for dispensing. We're seeing Eastern Europe, Middle East and some of the other country markets that hadn't been using the automatic dispensing equipment, adopt it for the first time. So some of that gets bookkeeped in Europe, which also provides us with a little reassurance with respect to it not being a slow down, at least as we can foresee at this point.

Fair enough. And then in terms of the restructuring benefits of $3 million to $4 million in '09, do you have a sense at this point that it's going to be more sort of back end loaded in the back half of '09, or would it be evenly spread across '09?

Pretty evenly spread.

Finally on the fluid metering side, I know on the year where you're basically kind of outlining the margin degradation was due to acquisitions and product, just to make sure, on the sequential drop that we had of about 70 basis points, that was primarily mix driven?

Yes, yes, essentially so.

Perfect, thank you.

You're welcome.

(OPERATOR INSTRUCTIONS)

We'll go back to Mike Snyder with Robert W. Baird.

Maybe you could just address HST growth in the third quarter. In your guidance on Slide 19 it says low single-digit growth again. I'm curious, shouldn't the growth at least be reaching mid single or even upper single-digit growth at this point as we lap two OEM contracts in the third quarter, or is my timing off?

Your timing's off just a bit. The headwind that's built into that low single digit comment that's associated with those two OEM contracts is actually fairly strong year-on-year. We basically don't lap that fully until the end of the year.

Okay, and just in terms of the acquisitions, you've walked through some of the margin pressure that they created. Are there still lingering inventory write-ups that are passing through the P&L that we begin - well, that we shed as we go into the third quarter, or is this just the lower embedded margin of the businesses that are acquired that are coming through right now?

Mike, it's actually not inventory but the amortization of intangibles. If you look at that 60 basis points for this company average in the current amortization we discussed, it's amortization versus any inventory impact.

So there's no natural step-up in the margins as we go through the balance of the year? This is the run rate?

For the balance of the year, correct. But as we move forward, we would expect margins to naturally improve the way the rest of the company does. But the amortization will continue at that rate.

Okay, and Larry, could you address acquisitions? I know you guys have been active. You described the pipeline as good. That isn't exactly an exciting adjective. I'm just curious if something's changed or if you meant more than that?

Mike, I would - maybe just to give you something more exciting than good, I would tell you that the pipeline's never been better. We've got a good set of very nice proprietary deals and other transactions in mind for the back half of the year that we're working hard this summer on. And frankly, I think we'll be very pleased with our results at the end of the year in terms of the acquisition-contributed growth and the strategic nature of how these fit for billing out fluid metering in health and science in particular. So actually, I feel good about what we can [capitally] deploy here between now and year-end. I think there's some good stuff out there that makes a lot of sense. We'll see them at IDEX-like multiples that make sense for us and our return models, and they'll be real solid additions to the portfolio.

Thank you again, and sorry to parse the words so closely.

No, thank you.

(OPERATOR INSTRUCTIONS)

I think we're going to go ahead and wrap up. I want to thank everybody for joining. Obviously, a very solid second quarter for IDEX in '08. We're well-positioned, I think, in the current economy and the environment. Looking into the back half of the year, we remain cost-control focused, but at the same time, as I said, we continue to invest in the businesses where we think we've got super growth opportunities. So we look forward to the back half of '08. Thanks for joining.

Ladies and gentlemen, this does conclude today's conference. Thank you for your participation. You may disconnect at this time.