藝達思 (IEX) 2009 Q4 法說會逐字稿

Good day and welcome to the IDEX fourth-quarter 2009 earnings conference call. Today's call is being recorded. For opening remarks and introductions, I would like to turn the conference over to Mr. Heath Mitts. Please go ahead, sir.

Thank you, Michael. Good morning and thank you for joining us for our discussion of the IDEX fourth-quarter and full-year 2009 financial results. Yesterday, we issued a press release outlining our Company's financial and operating performance for the 3 and 12-month period ending December 31, 2009. The press release, along with the presentation slides to be used during 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 CEO, and Dom Romeo, Vice President and Chief Financial Officer.

The format for our call today is as follows. We will begin with an update on our overall performance for the quarter and full year and then provide detail on our four business segments. We will then wrap up with the outlook for 2010. Following our prepared remarks, we will 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 the conference ID 7923468, or simply log onto our Company home page 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 will turn this call over to our Chairman and CEO, Larry Kingsley. Larry?

Thanks, Keith. Good morning, everyone.

Before we discuss the specific results, I am going to walk through some comments as to what we are seeing in the environment that we serve. My comments throughout the prepared remarks here are relative to the fourth quarter obviously also indicative of what 2010 looks like.

Most of our end markets have stabilized and some are beginning to grow again. The emergence of growth that we are seeing is stronger in some country markets and particularly in the developing nations.

The global infrastructure investment in Asia and the Middle East is now providing opportunities for us to expand in the energy and water businesses. It's a broad base of projects that we expect to continue through the year.

Our Health & Science segment is growing as a result of investment in new platforms that enable research and new product development. We here as well anticipate sustained 2010 Health & Science organic growth.

With just a couple of isolated exceptions, we expect a continued broader-based return to growth in the first half of this year. We are hopeful for ongoing improvements in the second half of the year.

Throughout the downturn, we remain committed to our commercial and operational excellence efforts. We continue to focus on better serving our customers and we believe that we are taking share. There's really no lagging restructuring effects that hinder our ability to execute essentially out of the chute right now as we are in 2010.

Overall, our fourth-quarter results were quite a bit stronger than our expectations. Our operating metrics reflect strong margin performance and continued working capital improvement. We've got good line of sight to solid operational execution this year.

Our balance sheet is strong and we will leverage that capability to acquire.

So we are pretty encouraged by the strong Q4 and we are now beginning to see, as I said, a little bit broader base of growth, certainly, the leading performance coming from the energy and water businesses and pretty well across the Health & Science segment.

So I'm going to jump into the results. I'm on the Slide titled Q4, the full-year 2009 financial performance. It's Slide 4.

For the quarter, orders were up 4%, flat organically. Sales were down 3%, down 7% organically, and they were up 6% sequentially from the third quarter.

Fourth-quarter adjusted operating margin of 16.4% was up 220 basis points from the comparable Q4 of '08. Sequentially, operating margin was up 120 basis points versus Q3. The stronger profitability is the result of our restructuring efforts plus positive segment mix in the quarter, but the improvement from the operating leverage was across the board, essentially all of the businesses. Q4 adjusted EPS of $0.43 was up 13% versus the comparable EPS in '08.

For the full year, orders were down 10%, sales were down 11%, down 14% organically. Full-year adjusted operating margin at 15% was down 210 basis points from '08. Full-year adjusted EPS of $1.53 was down 20% compared to '08. For '09, free cash flow was $190 million, and that's over 165% of income, down just 4% from '08.

So all in all, a very respectable year in light of the environment. Most importantly, we realized a strong exit.

So to jump further into it, into the segments, in Fluid & Metering, orders were up 2% in the quarter. That's down 2% organically. Sales decreased 5% and were down 9% on an organic basis. Adjusted operating margin of 17.9% was up 160 basis points from Q4 of '08.

As we expected, we saw the sequential improvements in the energy markets during the fourth quarter. As I said, earlier the infrastructure investment is continuing to grow, and we are seeing good global demand for our newer products.

Large capital projects in the power generation markets and the expanding focus of the oil companies in the midstream fuel management applications are also creating great opportunities. We expect these trends to continue through the year.

We experienced modest sequential improvement in our water markets during the fourth quarter, driven primarily by domestic municipal water and wastewater treatment projects. While the overall order rates are strong, we did anticipate the growth. We expect some municipal budgets, though, will remain constrained.

Some of our current growth is tied to new water product offerings. They have gained quick traction and are generating very strong interest.

We introduced our new [Enigma Sonic] network of sensors that is enabling a better pinpointing of water loss. We also introduced another family of products that are explosion-proof rated which opens up a number of adjacent water infrastructure applications.

In the broader set across this industry that we serve in this segment, project activity is increasing, especially in Asia. Some of that growth is a direct result of enhanced safety and environmental standards.

For the more developed regions of the world, we expect the recovery will be modest. We expect that to be the case in Europe and the US [process] industries will be likely a flat to slower growth story for 2010.

In summary for the segment, energy and water are growing, and we are cautiously optimistic about what we see out of the rest of the segment. Certainly, though, it has improved over our perspective three months ago.

In the Health & Science segment, total orders were up 10% for the quarter, and they were up 7% organically. Sales were up 3% in total and up 1% organically. Operating margin of 22.2% was up 420 basis points compared to the prior year, driven by volume, but the cost reductions and mix also contributed to the strong improvement in the quarter.

As expected, in the fourth quarter, we saw a return to the year-over-year growth in the core HST business. You know that business serves the analytic instrumentation and the life science markets and accounts for about 60% of the segment. The end-user budgets for instrumentation appear to be committed, and our OEM customers expect to drive growth through innovation, much of which we are enabling.

Our expanding capabilities continue to drive growth through instrument content as well. That is the value per platform that we participate on.

Beyond the core in the segment, we have been revitalizing the broader HST product line. We've introduced a new dry-operated vacuum system in the dental space and new products which will enhance ventilator equipment application for cleaner and quieter air, yet at the same time we are simplifying the equipment operation and maintenance. While these are global products, they are particularly targeted for the developing regions of the world.

The more industrial exposed portion of HST is also performing well. The team has driven just outstanding operational improvement and is well-positioned to take share. We anticipate this will be the case through the course of this year. So overall, very well-positioned in the markets we serve and we anticipate or expect we (inaudible) organic growth and great margins in 2010.

In dispensing -- I'm on Slide 7 -- total orders in the quarter were down 2%. Organically, they were down 9%. Sales decreased 10% and were down 17% organically. Operating margin was 12.3% for the quarter, which was up significantly from the prior year, as a result of the restructuring initiatives that we've discussed and we have executed over the last 15 months. The market conditions for dispensing we expect will remain soft for the year. Both the European and US retail channels are replacing equipment as necessary but not investing to automate, as they had been, nor to take advantage of new technology. Unless the customer tendency changes in the short term, we expect that dispensing will be down year-on-year, the organic decline driven by a lack of committed large DIY programs.

Obviously, given the margin performance as achieved in the fourth quarter, we have tremendously reduced our cost structure, which will enable us to weather the current environment and actually quite well. This segment will be profitable, will be a strong cash generator. So in the short-term -- and the short-term here means the full year of 2010 -- we anticipate that revenue growth will be fully negative.

In Fire & Safety, for the quarter, total orders were up 1%. Organically, they are down 3%. Sales were down 4%, organically down 8%. Operating margin at 25.5% was up 100 basis points compared to last year, primarily due to the cost reduction in the segment but also favorable mix within the segment. Global activity versus domestic market demand continues to drive strong, good growth opportunities and especially in the rescue equipment area.

So moving forward, emerging country markets will definitely be the best growth opportunities. As you remember, we dedicated a facility in China for this business. The China rescue market is expected to grow significantly over the next several years. We will leverage our in-country capability as well as our other rescue brands to an address those expanding needs.

As anticipated, the fire suppression quarter activity in North America continues to be impacted by municipal budget constraints. We expect that this trend will continue in 2010.

Our banded business within the segment is performing well, both as a result of rebounding markets but also new product activity. Banded should see at least half of their growth come from products introduced during the past two years.

So in total for the segment, we expect organic growth to be flat to down slightly in 2010 with international growth offset by domestic decline. Among the businesses, banded and rescue will be up while fire will be down. Profitability and cash flow will be excellent.

Okay, I'm going to move on to our guidance; I am on Slide 9. We expect Q1 EPS to be in the $0.40 to $0.42 range. Q1 organic revenue growth is projected to be up 2% to 3% and roughly flat sequentially with Q4 '09. CapEx at current rates will have a positive year-over-year impact on Q1 sales of approximately 3%.

For the full year 2010, our EPS range is $1.63 to $1.73, driven by expected organic revenue growth of between 2% to 4%. We expect FMT and HST to achieve solid mid-single-digit organic sales growth, and we expect the Fire & Safety equipment segment will be flat to down slightly due to the domestic pressures discussed. For Dispensing, we expect organic sales to be down as 2009, it included a one-time nonrecurring replenishment order and that we don't see as we said -- that those spending levels in retail will recover in 2010.

Overall for the Company, any growth above the high end of our range will be dependent on better economic recovery in the back half of 2010.

Operating margins will be in the 16% range. That's roughly a 100 basis point improvement over the '09 full year.

Our flow-through on the incremental organic revenue is 45%. For the full year, we expect FX at current rates will have about a 1 point impact, positive impact that is, to sales.

Other modeling items -- the 2010 tax rate is anticipated to be 33%. The full-year CapEx will be $27 million to $30 million. We will continue to convert very well with cash well in excess of 100% net income.

So note our earnings projections exclude our estimate for any additional restructuring costs, which could be $0.03 to $0.04 in 2010, as we anticipate executing a couple of remaining footprint initiatives.

So with that, we are going to open the line to questions. Operator?

Ladies and gentlemen, today's Q&A session will be conducted electronically. (Operator Instructions). Mike Schneider, Robert W. Baird.

Good morning, guys. Maybe first we can start on dispensing. It's quite incredible, the turnaround in margins that occurred on initially down sequential volumes. Can you just tell us sequentially where the savings came from, given that most of the restructuring actions I think were complete already? Then what you believe the new breakeven rate is for this business? Because I think historically we've talked about $30 million being the breakeven but we are clearly well below that now.

Mike, the largest footprint action, as you remember, began back in the later part of '08 into the early part of '09, but we did continue to take restructuring actions through the course of '09, right through to the middle part of the fourth quarter. So, you are seeing the continued impact of the costs as they exit the segment.

The bottom line is that, if you look at the quarter, you are right. That breakeven number is less than what we've talked about it historically but probably indicative of kind of where it is at this point. There's not another set of large initiatives that are going to impact margin in the segment.

The good news is obviously that, when that business comes back, it will be at a fantastic cost basis. We are still in a great global position, from an operating structure standpoint, to go after all of the parts of the world that we think are going to grow.

So are there savings that carry over into Q1 that would explain some of the strong Q1 guidance? (multiple speakers)

No, no.

Okay. Then just a question on the guidance -- if you look at -- historically your Q1 results I guess would have been down sequentially more than what you've got embedded in the guidance this time. Is there any unusual or out-sized projects that ship in Q1? Any expense savings or something that benefit Q1, that explain the strong guidance?

No, Mike. The seasonality year-to-year does vary a bit depending on what's going on. Obviously, we are required to over the years, so that impacts seasonality to some degree. There is nothing of what you described impacting Q1 in a positive sense. It's really it's a good thing. It's pretty broad-based, you know, what we are seeing on the order book and what we expect to flow through into the quarter.

Okay. The final question just on liquid controls and some of that energy exposure within Fluid. You mentioned the strong global orders. Is that where most of the growth -- and you mentioned sequentially better -- is that where most of the growth is coming overseas? Could you give us a sense of what type of projects that these are? Are they custody transfer or are these new physical plant construction? Just any insights as to where the strength is coming from?

Yes, I will give you some insight. I don't want to go into too much detail for market competitive reasons.

But the US market is actually holding fairly firm. The best growth is coming out of the developing nations. I would characterize them as both custody transfer but also infrastructure applications. So, it's where the greater world of weights and measures applies, where they care about inventory management and controls, but it's a little bit further upstream in some of the cases than what we have historically participated.

By developing markets, is the Middle East a key area, or is it broader than that?

It is border than that. The Middle East is part of that, a big chunk of it, but there are some very good opportunities coming out of Asia as well.

Okay, thank you.

Walt Liptak, Barrington Research.

Good morning, guys. I wonder if, kind of along the lines of some of the previous questions, you put an operating margin out for the full year. I wonder if we can get your range that you are assuming in the first-quarter guidance.

No, we typically don't provide that, Walt. I think, if you look at the full year 16% number that's -- obviously that's going to be pretty close to what we will achieve, assuming the kind of organic growth that we've assumed in the range as well.

Okay, fair enough. In the Fire & Safety division, you mentioned North American fire suppression being weak. Is that the fire truck pumps that are weak or is it products across the board?

It is fire truck pumps.

Okay.

We would tell you that, first, I mean, if you look at Fire & Rescue in total, international growth is stronger than domestic growth in our assumptions, but Rescue as a business stronger than Fire for 2010. Most of the content for fire is onboard trucks. So --

I guess my question is, obviously, this is now the biggest piece of the business but how worried should we be about it? I know that you've had a competitor that came out with competing pump technology. Are there market share issues or is it related to (multiple speakers) municipal?

No, I wouldn't -- yes, sure. There's nothing at all that we are concerned about in that regard.

As a matter of fact, we would say that our OEM customers are faring quite well with the industry data suggesting that they are actually doing very, very well from a share perspective. So it's really that we just expect muni budgets to be constrained. Most of the industry is talking to pretty well the same set of numbers that we are expecting. There's not a huge share gain or loss assumption in our onboard truck 2010 numbers in total, but certainly not (inaudible) of our share loss.

Okay, good. If I could just ask the last one and switch over to dispensing equipment? You know, the outlook being what it is, is there -- do these products wear out? Do maintenance costs go up? You are working with paints, they gum up. Is there an age of the machine fleet out there that you could look at or increase maintenance costs that will cause pent-up demand at some point?

The answer is yes; the short answer is yes. They do wear out. Actually, the more environmentally safe paint chemistries actually force wear-out faster in most cases than the older chemistry. It's kind of counterintuitive, but particularly around gumming up and drying issues, as you actually point out. The reality is that there's always a balance which is driven by the need to replace versus how much capital they are going to outlay in any given year for program activity based on what they think their reality for revenue is.

It's pretty easy, as we've talked before about; it's a pretty easy return on investment calc. So I do think that, once the market stabilizes in the residential and commercial construction world, we will see a pretty quick return to this as a product category that they're going to invest aggressively in. I just don't, frankly, think it's going to be 2010.

Okay. Is there a significant percentage of sales that's aftermarket parts or service?

There tends to be an aftermarket element which is more around retrofitting equipment that they decide they don't want to completely replace. There is a little bit of that going on right now, too, where they can make decisions, in some cases, to upgrade and retrofit versus completely replace. That doesn't tend to extend the life of the machine nor give the user all of the features that new equipment can, but it is kind of a Band-Aid that they can apply.

Okay, got it. All right, thank you.

Scott Graham, Ladenburg Thalmann.

Good morning. Larry, do you expect to get back up to your $20 million productivity number in 2010?

We don't have as large of a productivity number assumed in 2010. Basically, you know, we've got obviously a lot of heads out in '09, and while we don't typically hard account for the productivity numbers with accepting the rest of the headcount actions. When you take fairly strong actions like we did, on the following-year basis, you probably don't assume that you're going to get as much productivity pickup just because you got it, frankly, through some other footprint-associated actions.

On the material cost side, we will get a nice net material cost benefit. But again, in 2010, we are not assuming as large of a benefit. I think we are pretty well protected from that perspective, from a planning perspective, just because we have taken a reasonably conservative view given the uncertainty in the environment around us.

Okay. On the stimulus in particular, of course the water and the healthcare businesses, are you seeing anything booked in your order book as of today?

Yes, we are seeing little pieces in both water, and we expect that a little bit of the revenue out of Health & Science is coming out of NIH-associated spending, which is stimulus based.

Outside of the US, I would say the same. There are some Asian country stimulus elements that are certainly supporting growth, but it's not big and very little in Europe.

We do anticipate, through the course of the year, that in the UK, there will be some sales associated with water infrastructure spend that is stimulus-associated, as an example. So, it's not big. By any means, it's not big, but there is perhaps a little bit of a boost that we are currently seeing associated with those areas.

Okay, thanks. The last question is this, and this is more of a maintenance -- you went through, Larry -- and I was writing feverishly, so I'm sorry if to ask you to repeat this, but each of the four segments, could you talk about or just repeat what you said you thought kind of the core growth looked like for 2010 in full, each of the core segments?

I didn't really talk specifically about core growth by segment. What I said qualitatively was that, in Fluids & Metering, we expect energy and water will lead the segment in terms of growth. We are already seeing that. We said that Health & Science across the segment will experience good core growth.

In the summary comments, we talked about solid single-digit organic growth assumptions for both Fluid & Metering and Health & Science, offset by flat to slightly down performance for Fire & Safety and negative growth assumption for Dispensing. But we didn't quantify it beyond that, Scott.

Alright, I actually did come up with one more question if you don't mind? You had very nice improvement this quarter in the non-analytical instrumentation business of Health & Science, and you talked about revitalizing the products. I think that's what you were referring to. Could you go into beyond the products, that market -- I think your position to gain share -- why would that be?

There are a number of reasons. One, we have done a super job, as I did say, of revitalizing the product line over the last couple of years, but right through the recession, we continued to invest in the product line. If you remember -- and I'm sure you do -- where that business historically had gone after some one-off OEM applications that tended to be home use, lower cost, pretty far from non-core kinds of product applications, those things tended to be hit and miss versus focusing on things that were much closer to our core competence.

What we've introduced over the last 18 months or so are products that are going to have some very nice multi-customer applications. They are going to be global products. We are seeing a nice start out of our dental office vacuum systems, as I mentioned in the prepared remarks. We've got some ventilator products that are really -- air compressor ventilator applications different from anything that we've talked historically about with home-use ventilators. These are in health clinic products or hospital-applied products and they, again, are targeted for developing regions.

So I think that we've done a much better job, on the front end of the business, understanding what will be nice, sustainable technology, differentiated product. We've got IP wrapped around most of this.

The other aspect of what's gone on, though, is, as I said, more generally but certainly in this business, too, we got after cost actions very early, very quickly. We were able to exit very nicely. I think some of our competition has been left kind of flat-footed, frankly, both North American and European. It has allowed us to already begin to take some nice share.

So I think we are in a good position, frankly, on just a pure competitive basis, and the team has done a super job on the productivity side. The costs that we've taken out of our infrastructure and even on the variable cost side with -- inclusive of materials -- allowed us to get to a very competitive position with that business. So I, frankly, feel pretty good about what we've historically called the non-core portion of HST in terms of how we are bringing that closer to the core, both in terms of attractive markets but also the performance of that subsegment.

Thanks very much.

Ned Borland, of Hudson Securities.

Good morning. Just to follow up on a couple of the earlier questions here, with regard to the energy projects that you mentioned, mostly the developing regions, domestically with regard to the refinery market, are you seeing any kind of pickup in maintenance spending for refineries that would affect liquid controls or maybe some of the other folks?

I think we'd say that is kind of flattish, Ned, so not a huge growth assumptions being driven by US refinery spending on what is maintenance budget allocated funds.

Okay. Then with regard to the restructuring, is that something that is already planned, or is it sort of a contingent restructuring, you know, contingent on how economic conditions are or how do we think about that?

Contingent upon our continued review on return of investment of the couple of things that we're looking at.

Okay, all right.

Ned, within the number there is about $0.01 that is carryover from 2009, but the rest, the $0.03 to $0.04, $0.02 to $0.03 would be, to Larry's point, additional items that we would consider. But there is about a $0.01 of carryforward.

Okay. Then on HST, I mean, very impressive margins, probably the best since you've really broke that business out. It sounds like there is some sustainability to that margin, given the new products are ramping up and the core business seems to be going well. Are there any headwinds we should be thinking about in that business with regard to margin?

You know, as we've talked historically, there's always a little bit of mix impact within HST that quarter-to-quarter you can see things bounce up and down. Typically, it's not more than about 150 basis points less than that for the most part. So the question is, are we bouncing around at a higher level? The answer is yes, and it's all, frankly, because of what I just mentioned with regard to the prior question.

The situation is that there aren't any real margin laggards in the segment at this point. The team has done, again, just a great job on the cost structure side. So I do anticipate margin volatility to some degree as we go forward, but it will be at a very high level.

Okay, thank you.

Matt Summerville, KeyBanc.

Good morning. Just a couple of quick follow-up questions -- I want to make sure I'm thinking about the leverage in your business properly. How much do you anticipate seeing in 2010, relative to 2009, on an incremental basis related to your restructuring? Then how should we think about washing against that any add-backs you'll get or you'll experience in discretionary spend?

As we said earlier, basically the way to think about modeling the incremental growth is that we are going to flow it through at 45%. That's the number which is inclusive of a little bit of carryover year-on-year in terms of savings that you see from the 2010 versus 2009 impact. Also, obviously inclusive within that number are investments that we are making. We've got quite a few number of -- quite a few engineering projects we are working right now which will yield some nice out-year organic growth. The investments we are making back in the business would be also the bridging item as to how you get to that 45% incremental flow through.

The good news here is, as we've talked in the last couple of quarter calls, is that there really isn't a big cost flow-back concern because the actions we took were structural. They weren't temporary cost actions -- big, large, long furloughs, things of the sort that form some kind of headwind in 2010. Frankly, we are really pleased with the costs we got out because it's pretty much sticky. So --

Larry, and then just one more question -- how much pricing were you able to get across IDEX in 2009? Can you give us some color as to what you're baking into that 2% to 4% organic growth in 2010 and maybe across which segments do you anticipate being the most successful with pricing going forward?

There's not a lot of price baked into '09; it's about 0.5 point. There's not a huge price assumption built into 2010 at this time. It's also in the context of thinking that there isn't going to be a huge material inflation impact to the business.

As you remember from our model, we do have a fair amount of flexibility, given the customized nature of the product and the fact that we kind of price it out as we go to adjust, should we need to. So we are never typically in any way impacted by more than 60, 90 days by any radically changing commodity cost elements to our material cost structure.

The assumption -- big picture for 2010 is that material margins essentially hold with not a lot of impact on the cost side, nor a lot of price. We are going to be in a great position to offer very competitive pricing to our customers which, frankly, is, again, a function of all the good work that was done through the downturn.

Thanks, Larry.

(Operator Instructions). Charlie Brady, BMO Capital Markets.

Thanks. Good morning. With respect to your comments when you are talking about (inaudible) and saying that -- I think you said that half the growth ought to come out of new products within the past couple of years. Could you just expand on that thought to some of the other not necessarily individual business units but maybe some of the other business segments? Since you -- because you talked a lot about new products and I'm wondering if maybe that growth potential on a new product is being accelerated over the next 12, 24 months from maybe where it's been even prior to the downturn.

Well, I'm not going to go through a lot of specificity other than to say that we rolled off our plans for the year. Our product vitality assumptions that we've got built into the plan are very good; they are strong.

We didn't adversely impact our D&E in '09. As a matter of fact, actual spend, not rate of spend but actual spend for our D&E increased through the course of '09. So, we are in fairly good position, frankly, to take advantage of investments made. We assume that many of our customers are anxious for new technology.

So if you go across the segments and you get down to a pretty granular look, what we are seeing right now is new product growth at margins that are at least as good as the base margins in their respective businesses. That's going to yield, for the full year, some pretty nice vitality metrics. I think it's essentially across-the-board that we are going to see that.

Thanks, that's helpful. Then I will just ask the required acquisition question on how your pipeline looks and kind of where prices in terms of multiples look as they are today.

You know, it's the same comments that you get from us every quarter. We've always got a decent pipeline. Right now, I would say our proprietary deal pipeline looks pretty good, but we buy the right businesses at the right prices. We've got a number of those that are right businesses that are in various stages of discussions. In a couple of cases, I think we are going to definitely get the right prices. In other cases, they are the right businesses but they might be later at the right prices. (laughter).

Okay, fair enough. Thanks.

Christopher Glynn, Oppenheimer.

Going back into the HST margins, you said bouncing around at a structurally higher level. Within that context, was the fourth quarter a particularly good mix?

It was a good mix, yes.

Okay. Then just moving over to Dispensing, I'm thinking about the replenishment order you had last year. Do those kind of come out of the blue or how far in advance do you see something like that coming?

They tend to be long discussions but can still come out of the blue.

I don't know if I'm being -- I'm not trying to be dodgy. Basically, we are always in discussion with our Dispensing customers about how we can help them with fair value proposition by way of some new equipment or add-on equipment or whatever the case may be. They tend to be discussions that are held at multiple levels with pretty good-sized companies in the cases of the DIYs in particular. They tend to be decisions that go in the form of maybe maybe, maybe, maybe, yes! It's hard to time when they get to yes because there's multiple functional groups involved with those decisions as they take place in the customer base.

So it sounds like now there is really a lack of the maybe-maybe-maybe-maybe discussions going on.

There are "maybe" discussions going on.

There are. Thanks. That's all I had.

That does conclude today's question-and-answer session. At this time, I would like to turn the conference back to Larry Kingsley for further remarks and closing comments.

I would just like to thank everyone for joining. We obviously appreciate your interest in the Company. I am really proud of how our team was decisive early in the recession and we executed obviously almost flawlessly to position us extremely well as to where we sit right now.

Our comments regarding 2010 are assumptive on market stability. What we see at this point is that we will execute modest but very profitable organic growth. Obviously, the guidance doesn't assume any impact from acquisition but the balance sheet certainly could support that.

I guess the view of the macro environment is that we don't think that we're going to need a lot of help, even if the markets stay in limbo, we will create our opportunity for ourselves, and that we can deliver a very respectable EPS growth number in 2010, given all of what we said.

So thanks for participating and we look forward to seeing all of you through the course of the year.

That does conclude today's conference. We thank you for your participation.