Roper Technologies Inc (ROP) 2006 Q4 法說會逐字稿

Good day, everyone, and welcome to this Roper Industries' year end financial results conference call.

This call is being recorded.

At this time, I would like to turn the call over to John Humphrey for opening remarks and introductions.

Please go ahead, sir.

Thank you, Anola.

And thank you everyone for joining us this morning as we release and discuss our fourth quarter and full year financial results.

With me today is Brian Jellison, Chairman and Chief Executive Officer of Roper Industries.

And with that, I will like to go ahead and start our process.

For those of you on the line, the slides that we'll be talking to today are available on our website at www.roperind.com.

And this call is being recorded and a replay will be available later on today at that same website.

With that, what I would like to do is go ahead and turn to slide two and remind everyone about our Safe Harbor statement.

We will be talking about forward projections and be using some forward-looking statements and I would encourage you to take a look at this statement and listen to those comments in this light.

And so with that, what I'd like to do is now turn the call over to Brian Jellison, Chairman and Chief Executive Officer of Roper Industries.

Brian?

Thank you, John.

And good morning, everyone.

What we're going to do here in the first slide is to just talk about the areas we'll cover today.

We want to spend a little time on the fourth quarter, talk about the good and bad things there. 2006, we'll kind of review the full year and its implications for '07 performance.

And then we'll talk without the 2007 guidance we established last night in the release.

Sort of summarize what we've done and then open it up to questions and answers from you all.

Thank you.

The first slide here is kind of looking at the fourth quarter, at 60,000 feet.

We had records in every area; order, sales, backlog, earnings, EBITDA, DEPS, operating cash flow and the like.

Orders were up 34%.

On an internal basis they were up 26%, that would exclude the acquisitions, and there was about two points of foreign exchange credit in there, so 24% net.

Sales were up 18%.

Internal growth was up 10%, which included two points of FX as well.

We had $119 million of EBITDA in the quarter, which was up 70 basis points to 25.5% of sales.

And really broad-based strength in every segment, either through internal growth or through acquisitions.

Each segment was able to be up in excess of 19% in the quarter.

And our backlog reached above $0.5 billion for the first time.

The Dynisco acquisition, which we closed in December, we'll talk a little bit more about this morning.

And it's off to a good start.

If we look at the quarter four in the next slide, here you see our RF segment bookings were rebounded as promised.

You remember in the third quarter there was softness there, and we said from time-to-time we'll have sort of lumpy activity, but we were confident it would be up at least 30% or more.

Well, it was up 50%, excluding the international order that we were finally able to book.

Including that, actually, the segment was up 80% in orders.

We still would tell everybody this is going to happen, perhaps not quite with this much drama from quarter-to-quarter, but there always will be changes in this segment, due to the nature of some projects.

The TransCore opportunity here in the fourth quarter for margins was really disappointing.

We lost about 175 basis points, really, from a very unusual lack of product sales, including tags.

We had some orders that were pushed out.

And we expect that to be remedied as we go into the first quarter.

We're finally able to say that we won a large international contract, but that's about all we can say about it.

This is reminiscent -- for those of you who remember when we won the Atlanta contract for water for Neptune, many of you knew about it for five months before we could articulate it.

And it's the nature of the beast, I suppose.

So we really can't answer questions about where this is, or the overall scope of the project.

We did book a little bit of it in the December period and we will start to ship some of the activity in 2007.

It won't be the bulk of it by any measure.

As we looked at the Energy segment, it's really story of sort of two halves.

The second half performance, we indicated in the first part of the year, would be up sharply.

And certainly it was, with EBITDA margins reaching 31%.

Some of that was driven by our Compressor Control Technology business, which has had a very good run in oil and gas throughout the year.

The good news is that they've been able to replace all the old pipeline business we had.

The bad news in the short run in that transformation has been poor receivables because of the nature and terms and conditions they've had.

We commented on this in the last quarter.

And I believe that Paul and Tina are largely on their way to a better strategy for operating cash flow in 2007.

The negative effect of accounts receivables in CCC was a negative $11 million.

When we get to talk about the operating cash flow, which was about $263, if we would have had just half of that negative we would have been up to the $270 million operating cash flow, which was what we expected for the year.

Zetec also recovered nicely, as we thought it would, in the second half.

But in the fourth quarter, their revenue was up 16% and operating profits substantially higher.

On the Dynisco front, which we are going to report in through the Energy Systems and Control business -- we completed that acquisition.

The integration's going very well and in fact, we are in the process of trying to do some bolt-on acquisitions that will put us in the life science arena, which is an area we think Dynisco can make some inroads quickly.

On the next page, here we'll look at Imaging.

EBITDA margins improved to 27% in the quarter and operating margins were 22%.

Lumenera, which was an acquisition last year, is winning some substantial OEM business.

And we think that will drive some of the 2007 growth for Imaging.

Gatan has had all-time record performance in every category, whether that's orders or it's sales or operating profit or leverage from the increased business activity.

In fact, we've supported them by adding a clean room capacity in Pennsylvania to try to do more of their sensor bonding and get more products out more quickly.

Neptune, which we report in the Industrial segment, had just a spectacular fourth quarter, which really followed on the heals of an unbelievably good year.

And the reward, of course, for that, as Chuck and everybody knows, is they get to do it again here in 2007.

But in the fourth quarter, they had more than two-thirds of their revenue actually related automatic meter reading encoders and devices.

So we just continue to break records each quarter here in terms of share gain and the volume activity that we have -- that we have in the integrated R900 has been just an overwhelming success.

The record backlog that Neptune had at the end of this quarter will be very helpful to us because, generally, the first quarter of the year would not be as strong.

But we're running sort of full-out at Neptune as we speak and expect a strong Q1 from them.

Our Struers business in Denmark had a very strong fourth quarter across the board.

And of course, the currency translation to us on the European sales is a wonderful thing, as it relates to dollars.

And that's where a lot of that foreign exchange gain is coming from.

The Pump businesses, which I know not everyone loves -- we have some just wonderful people in the Pump businesses.

And these guys have really done an incredible job this year.

They've set every record they've ever had in these businesses.

In the fourth quarter, both their sales and orders were up double digits and they're getting very substantial leverage gains off of that.

They have the highest backlog in our history.

And they'll come out of the shoot here in the first quarter doing well.

The Industrial segment in total -- just really across the board has deep strength.

And our backlog at the end of the year was a little bit more than 70% higher than it was at the end of last year.

We turn the slide here, we look at the fourth quarter income statement.

Here you see orders were up 34% to $527 million.

As we said, 26% internal with 2% FX.

Net sales were up 18% to $465 million, that's 10% internal growth.

Gross profit was actually up 10% to 50.7%.

And income from Ops was up 20% while sales were up 18%.

Operating margin in the quarter was 20.9% for the enterprise as a whole.

As somebody noticed, year-to-date, our total operating margin for the year finished at 19.9%.

So it's been a good operating profit year for the Company.

Tax rate requires a little discussion.

In the fourth quarter in 2005, the Company benefited from basically repatriating the foreign earnings, which was a one-time opportunity.

And at Roper, we had extremely conservative accounting around that over the years, so it gave us a tax benefit that reduced the tax rate artificially last year in the fourth quarter.

And we told investors at the time that that was worth about $4 million.

On a year last year, we reported on a DEPS basis $1.74, but thought on a continuing basis it was really $1.70, because the $0.04 -- or $4 million, in this case, wouldn't repeat.

And as you can see, the tax rate has snapped back to 33.7%.

And we got a little bit of benefit from the R&D tax credit.

But fundamentally now, with about 40% of next year's business we expect will be outside the country, but much of it in situations that get treated as U.S. income, we actually have started the year with guidance suggesting a tax rate of 35%.

And we'll do everything we can to whittle that down, but we've got 60% domestic business with a lot of state exposures.

Net earnings, you can see, for the fourth quarter were $57 million.

That's up from $50 million reported, but really $46 if you adjust for the non-recurring tax benefit last year.

DEPS last year then was $0.52 with that.

And DEPS this year was $0.62 as reported, but really $0.64 if you exclude the convertible dilution that we had temporarily.

The option expense in the quarter was additional $0.02, which is inside those numbers.

Let's turn our attention now to the next slide and we'll start to look at the full year activity for Roper.

The income statement for the full year is sort of more of the same.

But you see orders up 20% for the full year, 13% of that was internal growth with only 60 basis points of FX.

So the fourth quarter's where most of the foreign exchange benefit came this year.

Net sales were up 17% to $1.7 billion, 10% internal growth.

Gross margins for the full year actually expanded 60 basis points from 50% to 50.6%.

Income from operations went up dramatically from 18.2% last year to 19.9% this year, 170 basis point gain.

Our tax rate, certainly was a headwind, as somebody said.

Tax rate was 34% for the year against last year's 30.6%.

And certainly, we were hoping for somewhat lower tax rate throughout the year.

But 34% is where we ended.

Net earnings, as you can see, were $193 million, up from $149 last year or $153 if you include that non-recurring item.

DEPS at $1.70, up to $2.13.

But if you exclude the CATs convertible dilution, it would have been $2.18 and up 28%.

We also ate $0.08 of expense.

And when you look at the option and related expenses for us, it's interesting because the actual expense in the year before was $0.12, and we only reported about $0.03 of that under the normal GAAP.

And this year the expense dropped from $0.12 to $0.11 but with the change in the 123(R) program, we wound up looking like we spent $0.08 more, when in reality we spent $0.01 less.

But that's enough on that subject.

Asset velocity, the next slide; here you see in 2004 if you take the four point average of networking capital for the year, we were at 19.3% of sales.

Last year, the four point average for the year came down to 16.6%.

This year, it came down to 15.1%.

And we're continuing to improve, but you can see it's a little bit of a declining improvement rate.

One of the things we've learned this past year in 2006 is we're going to have to focus our operating teams, and particularly the segment people, a little bit more on receivables.

Because all of the angst around this year was receivables.

They're certainly not at risk but we've got a couple of businesses that are internationally driven and oil and gas related that have longer receivables than we think are appropriate.

So we're continuing to look at asset velocity and you can count on that number getting better.

We look at the next slide, here we're going to look at our balance sheet -- sort of credit worthiness, if you will, at the end of last year and at the end of this year.

In December of '05, we had a total debt of $894 million, that's gone up to a $1.27 billion.

Cash is up a little bit.

So net debt last year was $841 million.

Net debt this year is $957 million.

You can see the shareholders' equity there on the slide, so net debt to net cap actually came down 100 basis points from 40.2% last year to 39.2% this year.

If you look at the net debt to EBITDA measurement, you would see last year we were at 2.5 and we've been anywhere from sort of two to four in that number in the past.

This year we're at 2.28 the end of the year.

If you take the $500 million-plus EBITDA number and divide that by the debt, you'll see the net debt to 2007 EBITDA would be at 1.91.

Which would suggest we've got a good deal of fire power here for acquisitions that you're likely to see deployed throughout the year.

EBITDA -- the interest coverage is pushing 10 times.

And last year we invested $352 million in acquisitions and yet improved all of our credit stats.

Which gives you some idea about the power of the cash flow that we have and we'll continue to generate and actually accelerate this year.

Next slide.

The acquisition process we have -- we try to talk to people about this.

We think it's pretty straight-forward but maybe somewhat more disciplined than what some people do.

We always look at asset-like businesses.

If we think about the Dynisco transaction -- we thought we'd sort of walk you through the filter.

Dynisco's CapEx is less than 1% of sales so it gets a check mark.

We expect the acquisition to be immediately cash accretive.

And in Dynisco's case, it's a business we expect will exceed $100 million this year with more than 25% EBITDA.

So that business will not have any trouble being cash accretive.

We want to focus on the market structure and driving forces at work in the marketplace.

We like everything we see about Dynisco's end markets.

There's a small number of people competing against them.

They're absolutely the lead dog in the spaces that they serve.

And their engineering capability and willingness to work with us on new product development, I think, will produce and accelerate a growth profile for them.

Management continuity is important for us.

We don't have folks we drop in as a SWAT team.

And so getting Larry and his guys to kind of envision making whatever adjustments are required to fit what we think would accelerate their activity has been important.

And we have linked up with everybody already on what '07 and the out year should look like.

And as always, we ask people to really think about maintaining what they do well, but being willing to change those things that perhaps need to be adjusted.

In Dynisco's case, we may put some additional work in their new Malaysia operation.

And we're going to buy some bolt-on acquisitions for them to get them in some of these space that's we think they can perform well in.

Governance for us is just driving the quarterly review an year-end planning process and kind of monthly bridge analysis.

And these guys have already learned as -- very quickly after two months, and have performed very well against those standards we have.

And then we want to grow what we buy.

And in Dynisco's case, we see that as high single-digit growth business with terrific leverage associated with it.

Next slide.

We'll tell you a little bit more about the company.

The company really has a leading position in very attractive end markets, especially a sensor technology company.

They have over three million deployed sensors around the world and they have 14,000 installed analytical instruments that are using those sensors to monitor various processes and provide information to people about the nature of their production activity or their batch manufacturing or whatever the application is the person wants.

They have a very diverse customer base, so they're not dependent on any one group.

Over half of the business is international, which will help us get closer to sort of 40% international profile for 2007.

The application opportunities we think they need to support their growth are already well underway.

And we think we'll perhaps make an acquisition within the quarter that will really solidify our plans in that area.

They've got a great leadership team and a new plant operation in Malaysia that we like.

Next slide.

The segment realignment for the year, where we had going into the year five segments, and made instrumentation segment essentially be integrated into the four other segments, has been a -- certainly a home run for us.

It's enhanced our growth initiatives, gotten people focused on some things we thought that they ought to be looking at, by getting all of the people that are in the same market orientation together.

The segments have universally expanded their EBITDA margins.

And execution throughout the segments have been better than in any prior year.

Each of the segments has been able to identify several bolt-on opportunities.

And we've actually executed a few that we'll talk about.

And more importantly, as we went through our preparations for the next three years and thought about the businesses we have and how they're aligned, all of us came to realize that there -- a large number of our businesses that really are helping customers protect their assets and improve their processes.

And getting really comfortable around sort of a protective technology base of activity encouraged us to execute the Dynisco acquisition.

And I think you may see more things like that in the future.

Next slide.

Here if you look at complimentary acquisitions made -- frankly, we wouldn't have done any of these without the sector realignment.

Because they would have been small enough that we would have struggled to try to achieve those at the enterprise level and provide any guidance to those people.

So Sinmed went into the emerging medical opportunity we have with Civco and MedTec.

And Sinmed is an entirely European company.

There we get to expand our reach and bring their products into this country and vice versa.

IntelliTrans is a business that we are putting inside TransCore, which is a logistics business around software and track and trace technology for the rail industry.

AC Controls is really a complimentary business to our petroleum analyzer operation, which has been so successful the last several years.

And AC Controls gives us a great installed base and complimentary technology for PAC.

And lastly, Lumenera, which gives us a lot of security applications and OEM relationships that allow to us drive more growth in certain lower end cameras than our existing businesses do.

So the segment realignment really has done everything we hoped.

On the next slide, you'll see how it's affected our EBITDA performance.

In the RF segment, still the lowest EBITDA performer.

But of course, it's been here the least long time.

Came in at about 24% rounded up and it has 47% gross margins.

Industrial, which benefits from just excellent performance from pretty much all of its business but particularly Neptune, had 28% EBITDA and 48% gross margins.

The Energy business, which rebounded sharply in the second half, finished the year at 29% EBITDA and 54% gross margins.

And Imaging at 26% on 57% gross.

The enterprise then finished the year at 25%, up 160 basis points from last year.

Next slide -- we'll start to look here at the segments.

The RF technology segment -- excuse me.

Orders were up 25%, sales up 18%.

On an internal basis, orders were up 21% and sales were up 14%.

We've had substantial growth in our Freight Matching Subscription area and technologies associated with that.

We think that will continue, if not accelerate, here in 2007.

The next generation rail tag adoption rate has gone as well as planned and continues to do well.

The expanded use of eGo tags is something that should drive growth in '07 and improve some of those ratios that deteriorated in the fourth quarter because of the lack of sales of shipments of those in the fourth quarter that we expect to reoccur immediately in 2007.

Our Inovonics Wireless Sensor business had a record year.

They continue to do submetering for Neptune's water business and do a whole lot of other things around security controls.

Operating margins in the segment were up 260 basis points to 17.3%.

But I'd remind us how much amortization we have because of these being acquired businesses.

The actual EBITDA in those businesses closed the year at 23.5% and $110 million of EBITDA.

Pretty much everything we see going on is favorable there.

This large international project, which we really can't talk about about, you can kind of back into what the bookings were in the fourth quarter -- will be a wonderful spring board for us for global activity.

It won't be super high margin activity.

And we'll probably have to talk about that as sales occur throughout the year.

Next slide.

Industrial technology had -- of course, there's really no acquisitions so everything here is internal.

You can see the orders were up 18% for the year, sales were up 11%.

The Neptune RF integrated automatic meter reading technology was really nothing short of spectacular.

Just incredible work by everybody in [Tallasy] to meet the demand for these products as they came offline.

Very significant projects wins.

We talked about Atlanta and Key West and Raleigh and other places.

The backlog for Neptune is unprecedented.

While normally they would have a light January and February, they're basically working at full tilt.

Our Struers business in Denmark and the pump businesses both recorded double-digit order growth for the year and have had nice leverage associated with that.

You can see the operating margins are up 220 basis points to 23.4%.

And that's pretty good work for an industrial-based business.

The execution we're getting around the focus that we have has led to some of that margin expansion.

And Neptune did a wonderful job, basically, of avoiding cost risk of copper throughout last year by some creative hedging with us and also looking at cost reductions in the electronics side of the business.

The kind of take away on Industrial technology is we still have favorable markets there with great backlog.

So we see that as a strength throughout '07.

Next slide would be Energy Systems and Controls.

This is really a story of two halves of the year, as you can see.

For the full year, sales were up 10%, orders up 8%.

We had a real drag in the first half of the year with Zetec.

Operating margin was terrific throughout the year, you can see at 26.3%.

And that includes the inventory step-up charges for AC Controls and Dynisco.

But if you look at the two halves, you'll see in the second half of the year, our sequential increase compared to the first half is; orders were up 44%, sales were up 38% and operating profit up 66%.

And then if you look at the second half of the year compared to the second half of last year in '05, you'll see orders up 16%, sales up 23% and operating profit up 20%.

So we really feel that the Energy group is on-target and where we expect them to be.

The AC Controls acquisition has been integrated well with Petroleum Analyzer already.

CCC continues to drive growth out of oil and gas, as its pipeline business fundamentally disappears.

Zetec did what we said it would do in the second half with their turn around. [Dan Pines] is running that operation, I think, with renewed vigor.

We were able to consolidated the Houston operations in the first part of last year, so we're starting to see some margin improvement in those areas.

And of course, the expense associated with that is behind us.

Dynisco is off to a good start.

And we don't see anything slowing that down in '07.

Next slide.

If we look at Scientific and Industrial Imaging, here you can see because of acquisitions for the most part and continued improvement in Medical, that our sales were up 36% and orders were up 30%.

The internal sales growth for the year was up 10%.

Medical was certainly a major portion of that, as they develop new products and integrated their acquisitions that they had made last year with Medtec and this year with Sinmed.

And Gatan had a spectacular year, in terms of all forms of growth and contribution to the enterprise.

Operating profit in the segment was up 51%.

Medical products and the channel mix associated with Medical going more direct and less through distribution helped considerably there.

And then Gatan's operating leverage on its higher sales was quite good because we start with good gross margins in the business anyway.

We're executing some consolidations in our camera product lines.

There's some activity that's occurring here in the first quarter in moving product production to various places here in the U.S. and Canada.

We think that should help our cost structure and normalize inventory.

We really do need to do a better job in inventory in Imaging, that will be a major thrust for them in '07.

Lumenera and Sinmed acquisitions are going to create wonderful opportunities for us in '07.

Sinmed, just on the base of global reach, and Lumenera on the basis of new products that have been accepted by 0EMs that we'll be able to fund and drive at a faster pace than they would have on their own.

Then if you look at that time bottom, the take-away for me about Imaging is that EBITDA margins were up 390 basis points to 26.2%.

And that's just not the kind of statement one would have thought could you have made about Imaging three years ago.

Next slide.

Here we start to look at our 2007 guidance.

Start out by saying this is probably going to be a more inquisitive year than the last two years.

While we've got a patient disciplined process around that, that I think has paid a lot of benefits to our investors, as we continue to focus on sort of secular, non-cyclical growth business, we have not really had a pipeline that's as full as this, ever.

We're anxious to get behind this call and our work and the K and the proxy and everything else because there's a lot of work for John and the rest of us as we work on these transactions.

Last year we invested $352 million in great businesses at really fair prices all the way around.

And today, we just see a myriad of attractive opportunities.

So a lot of different reasons that seems to be the case.

And our financial capacity certainly supports being able to do acquisitions at an increased pace, frankly.

When you look at a debt to EBITDA number for the end of the year at 1.9, that's probably a lower number than you would expect us to operate at.

And those of you who think we ought to have a little more leverage, we would agree.

We think we've got a great process and we think there's a lot of things that look exciting about '07.

But we don't have any of the acquisitions that aren't announced in any of the guidance for the year.

We look at our 2007 outlook, then, we see secular growth trends continuing.

Last year in '06, the bookings exceeded sales in all four quarters.

The backlog reached $0.5 billion, so we know we're going to have a good Q1.

The segment orientation is doing well, as we commented earlier.

We think we've got great operating teams in the field in almost all the businesses now and they're working on the right things.

The bolt-on acquisitions they've been able to identify, we've been able to execute on several.

And we'll do more, certainly, this year.

The businesses, that to us had a -- much more confidence as we went through the planning cycle in the fourth quarter than we've seen in the last couple of years.

They certainly all see growth trends that are well above GEP kind of trends.

We are positioned as a result, then, to have a record year in '07.

The markets are generally favorable and the pipeline for acquisitions good.

We've got some niche transactions that we expect, likely will be announced before the end of the quarter, or when we release earnings in the first quarter in April.

Those will fit in nicely with the kind of things that we did last year that were smaller scale -- right price and the right kind of cash flow and earnings accretion.

And the balance sheet, as we said, is in a wonderful position.

Next slide would be the absolute numerical guidance.

Here you can see -- excuse me -- that the diluted earnings per share is $2.50 to $2.62.

I believe the consensus out there was about $2.56.

If you look at the EBITDA and operating cash flow and net earnings numbers; you'll see net earnings, we came in at something above $232 million against this year's $193 and two years ago $153.

Operating cash flow, which I think frankly, we're going to do a better job of out of the box this year than we did last year, should be at least $310 million, up from $263 last year and $235 the year before.

And the EBITDA we expect to exceed $500 million.

And in the press release, there's a trail that shows you where that comes.

And it does include a fairly high tax rate.

So the takeaway here is you've got DEPS at $2.50 to $2.62 and EBITDA above $500 million and operating cash flow in excess of $310.

Next slide would be the summary.

We had a good Q4, which really capped off a record year for 2006.

Favorable end market support growth here in '07.

The backlog makes Q1 easier than normal for us.

The segment realignment, we think, has people focused on the right things and productivity continues to improve, as do margins.

We know we have room for improvement in net working capital.

Our segment people certainly know that.

And they'll be a lot of attention around that throughout the year.

Our guidance supports greater than $500 million in EBITDA for the year.

The acquisition pipelines look attractive to us.

I know people are worried about that because of private equity; believe me, it's not a problem for us.

Operating cash flow, as we say, ought to exceed $310.

And sales could reach $2 billion this year, if we're really lucky.

And with that, I'd open it up to calls.

Okay, Anola, if you can please start the question-and-answer period?

[OPERATOR INSTRUCTIONS].

We'll take our first question from Ned Armstrong, FBR & Company.

Good morning, guys.

Hey, good morning, Ned.

You have been very enthusiastic today about your opportunities for acquisitions.

And I just wanted to see if you could help us think about how much of your cash flow per year you want to deploy in acquisitions?

Not necessarily for this coming year, but just how you think about it over the long-term.

I mean, can we thing about you redeploying all of your operating cash flow into acquisitions or x percent of prior year sales?

If you could just try to frame way for us to think about it, I think that might be helpful.

Because it's clearly an important part of the story.

Well, certainly, we think about our operating cash flow being at the highest and best use reinvested in the right kind of transactions with the right kind of discipline and the right places at the right time with the right people.

So it's always a function of when they're there.

If you look at operating cash flow of $300 million plus, what happens in terms of acquisition powder is, if you buy something at whatever multiple you want to pick, it has a multiplier effect.

In our case the multiplier effect, with the kind of prices we generally pay, is usually around 1.5 times the cash flow.

So if you have $300 million in cash flow, you really have $450 million of acquisition opportunity.

And if you can buy things that are, let's say in the neighborhood of nine times EBITDA, you have sort of $50 million of EBITDA that is never on your books at any given point in time.

The Company would always look at maximizing shareholder value.

And the best way for us to do that is to find and negotiate and govern the right kind of deals that are available.

That's what's driven the value in the Company in the last three or four years.

And I don't see anything to change that.

So in a normalized year, we would expect to invest somewhere between $350 and $500 million.

But we are paying down our debt at a fairly fast clip because of the cash flow.

So I don't think most our investors would like us to be below two times debt to EBITDA.

So if you were back to three times debt to EBITDA, you would have an additional amount of money on top of your cash flow to invest.

There's certainly a lot of balance sheet power in our business model for '07 and beyond.

And we intend to invest that wisely and patiently.

So is it fair to say that, in looking at how you invest, you would think of it much more in terms of a very high percentage of your operating cash flow as opposed to targeting it based on, say, something like prior year sales?

We wouldn't target on prior year sales.

No, we would never buy sales.

We would always buy recurring cash in businesses we could grow.

And so the reinvestment of our cash flow would be focused around that kind of thinking.

We always -- people who are trying to buy revenue can make some egregious mistakes.

And people who think they're buying EBITDA without looking at EBITDA minus CapEx and whether or not the business can grow are going to make mistakes.

So we're going to look at all those issues when we make a decision.

Okay.

Good.

Thank you.

Our next question comes from Mike Schneider, Robert Baird.

Good morning, guys.

Good morning.

Maybe first, we can focus on Neptune.

It sounds like a closed on very strong note.

Just what has changed as the year unfolded?

Is it just the new integrated meter that's driving incremental sales?

Or do you sense a change in market dynamics and market strength?

I think there's at least three things.

Certainly, the new product with the integrated meter has had a rapid -- more rapid rate of adoption than people expected.

We knew it would be a home run, but we were expecting that it wouldn't have the level of sales immediately.

Secondly, you have had a lot of projects that have been hanging around for a long period of time that people are finally beginning to execute.

And fortunately, many of those are ours.

So that's good.

And then thirdly, there's a situation as you get any slowdown in residential construction, these municipal water companies wind up with labor that they can deploy and the first thing they do is to replace worn out meters that will have a very fast payback to them because the meters [ingrade] the favor of the customer rather than utility.

So when they're sort of working full-out installing meters in new residences and they get a chance to go back to retrofitting stuff, the pace of the retrofit is actually faster.

So business can go up.

It's a wonderful counter-cyclical activity.

And when you look at just the pace of growth, what did Neptune actually grow in '06?

And I guess what are your expectations for '07?

Well, I'll say this.

When we bought Neptune, we told investors we thought it could grow at sort of 4 to 8%.

And it's done over 10%.

It was in excess of 10% this year.

And a lot of that is the dollar nature of the activity because we had over two-thirds of Q4 sales tied up in automated meter reading, which had much higher price points than just the water meter itself.

So this thing would appear to be fair to say that it's much more like a double-digit growth business.

And will continue that way because there's such a low rate of adoption that AMR water piece is going to continue to grow at double digits, we think, for a long time.

Does the mix shift toward AMR benefit margins as well?

It does benefit margins.

Because the meter itself -- a typical thing -- or commercial meter may be a little better than the residential meter, but those things are always bid.

It's a very aggressive price model in the marketplace.

We're blessed to have really low cost production of business because of the vertical integration we have.

But it's an aggressive marketplace.

And the electronic opportunities give us more cost reduction. [inaudible] is alive and well and we know how to use it.

Okay.

And to the extent you can, the international contract at TransCore; to what extent -- well, I guess, to what extent have you booked the order -- in other words, the $27 million you booked this quarter, what percent of the total is is?

And will it ship entirely in 2007?

No, it won't ship entirely in 2007.

I think there's kind of that draconian stuff around communicating this.

But it's a multiple year contract.

And at the end of that contract, it has an opportunity for annual extension.

So it's a long-term proposition on the part of people that are looking at doing some things that they've never done previously.

And the reward for us is that they looked aggressively at every technology in the world and made a decision to use ours.

So we'll be working with them.

And I wouldn't overhype the fact that it could be substantial revenue over the next several years because the margins associated with it are going to be missionary margins.

What is your policy on booking orders, Brian?

Is it just that which you can ship in 12 months?

It is, Mike.

Yes, we only book what we can ship in 12 months.

Okay.

Thank you again.

You're welcome.

We'll take our next question from Alex Blanton, Ingalls & Snyder.

Good morning.

Great quarter there.

Thank you.

I'd like to talk about the acquisitions.

You mentioned they're going to be more active.

You have a very full pipeline, as you said in a recent conference.

You don't have time to look at everything.

Is that correct?

It's somewhat true.

It's all self-limiting.

We've played with the idea of acquisition pipeline was full but so was the toilet.

So I can't -- there's -- what's happened that is sort of unprecedented is, there's a lot of people contacting us who we've been talking to for months and years who have renewed interest in selling this year for fears of tax changes that could occur with politics of the day.

And we got a pretty tight filter, so we have more than ample time to look at everything that excites us, believe me.

Where would you focus your efforts if you had to make choices?

In which of your segments?

Wouldn't really do it by segment.

We would really do that by where we thought we could add the most value.

We don't really want to buy something if we think we can't improve it, along with the existing leadership team, in some way.

So if we were picking a perfect spot, weed like to do more with our Civco medical operation, we'd like to do more with our security applications.

And I think we'll do more in this protective technology area, where there's a lot of sensor opportunities out there.

And if you think about the businesses we have, excluding pumps, if you think about the industrial areas and in -- really the control and energy areas, they're really around protecting assets and providing information to people for better productivity.

And I think we'll -- we're going to look at more of those opportunities than we have in the last two years.

Okay.

On your guidance, will the accelerated acquisition program have an impact one way or the other, do you think?

I mean, it's not in there right now, but could it hurt things or would you not foresee that?

No, I wouldn't foresee that.

It's not that it's accelerated.

What's -- the last three years, pretty much each year, we've looked at about $5 billion in potential transactions and we've invested, on average, about $500 million.

So 90% of the stuff we look at we don't do.

I don't think that will really change.

It's just that we're interested in what's going on now because a lot of people that we would have liked to encourage talking to us in the past are talking to us now, who were kind of slow rolling.

So that's interesting.

And also with the --- getting the segment structure behind us is a good thing.

And it gets everybody a little more focused.

So I think everybody's pretty efficient this year on what we're looking at and what we do and how we would do it.

And we've got a tight discipline around what to do and a great process.

So we happen to have a good balance sheet, sort of coordinated with pretty good focus and discipline, that makes us think it could be a bigger year than normal on acquisitions.

But if it doesn't work out, it won't work out.

I mean, we're not going to go invest $350 or $400 million if it doesn't look like a great transaction for our investors.

Right.

You didn't mention this, but your guidance this year does include the dilution, right, from the converts -- whereas last year it did not?

Well, we tried to make it easier for everybody.

In the appendix you'll see what -- the guidance includes all of dilution that we had through December 31st of 2006.

So if you looked at the amount of shares that are out there, there's 2,665,000 shares, I think that are in the CATs dilution, our guidance includes covering those.

Okay.

And in the first quarter you have -- you're entering the first quarter with very good momentum, as you mentioned, in a number of parts of -- in Energy and RF and Industrial.

And you should have a very good comparison in Energy versus last year, based on what that slide showed.

So do you feel very comfortable with your first quarter of guidance?

Oh, we do.

Yes.

If it were -- I think we're we're at 52 to 55.

And last year we were 42, right?

So we're --

42.

On the low end, we're talking about being up 24% in the quarter.

Okay.

One more question.

On Tuesday this week in The Financial Times, there was an article entitled 'Full Speed Ahead for Intelligent Car Design,' which relates to programs -- governmental programs and industry programs and all the major car companies being involved in developing a infrastructure for highways in which the cars would be wired and there of be readers on the side of the highway to detect where the cars were.

It's a collision avoidance system and accident reduction system and so on.

It's very controversial, as it would involve installing recording devices in automobiles and so on.

But TransCore has been involved in the development of these ideas in the industry and with the government.

Could you elaborate on it?

Where do you see that going?

Is that really going to happen?

And how big could that be?

Well, I think that -- we think that it's a wonderful idea.

But I think that industry experts would suggest that collision avoidance technology is very expensive.

In an industry where there are rumors that General Motors is going to buy Chrysler, just think about trying to get car manufacturers aligned around putting this technology in the various cars.

And how long would it take to cycle through the ownership requirements.

And it -- once you get into electronic vehicular registration, which is something we believe deeply in, you find out how many registration voids there are; it's just hard for us to think that that level of technology is going to have an adoption rate that's going to be very meaningful in the next five years.

But TransCore is involved in that effort, whatever it is?

We certainly --our design engineers, both in San Diego and Canada, are all over those opportunities.

Okay.

Thank you.

You're welcome.

We'll take our next question from Christopher Glynn, CIBC World Markets.

Good morning.

I want to start off with a question on RF.

It's interesting that you broke out the international order from the backlogs.

Could you just talk about the rationale for doing that break-out?

And also the potential for further international opportunities, if there's any kind of pipeline visibility there that you could elaborate on?

Well, we have said that our recovery in the RF and in the orders after the third quarter would exclude anything associated with this international order.

It was something that had been rumored about for a while.

And we didn't want that one item to be able to kind of be the way that we were able to meet our expectations for the fourth quarter.

So we wanted to make sure that, as we talked about that being up 30% in the quarter, in terms of what we had expected, and we met and exceeded those expectations, it wasn't just because of that one order.

Okay.

And then on the pipeline -- or potential opportunities for further international deals?

Well, there are a lot opportunities.

The frequency codes, internationally, are different and there's always individual government action and there are really great companies, like [Capsh] in Austria, that have a lot of momentum around things that they do.

And some countries have sort of host manufacturers.

So one of the things that we thought we'd be able to do is to expand global reach in this area.

And I think we'll continue to work with the TransCore folks on trying to think about how we can do creative things.

One of the big opportunities is that there would be more road privitization.

I think if you get more road privatization, then you'll get people making economic decisions more quickly around payback analysis than sometimes you do with decision makers who are less controlled by the payback.

Where do you see the prospects for road privatization potentially taking hold?

Well, you see it everywhere, Christopher.

I mean, it's a global phenomenon.

Certainly, China has done a lot of the lead in that.

You've got McCrory out there with their funds.

Goldman recently raised a fund.

There's a lot of activity for people to get that.

It's just a question of whether you can get investors who are willing to take sort of a bond annuity stream of consciousness or not.

But I think you have more and more governments strapped for funds and capitalizing road systems that can then become toll roads instead of freeways are -- can be an exciting alternative for people.

Okay.

And then just your latest thoughts on the EZ Pass prospects for getting a toe hold there.

Is it looking more like something where both of the companies would get some of the action, initially?

I think from anything we've seen related to what was supposed to be an open bid in August of 2007, you would have had to have some RFP on the street that would have been able to be exercised and we haven't seen that.

What most people talk about is that perhaps the EZ Pass sole source provider on certain cards and readers lowers their price in exchange for extending the thing for six months or a year or whatever they need to do.

And there's not a lot we can do except be ready to serve when we're called.

And we certainly know we have technology we think superior, price points that substantially less.

So whenever the [inaudible] agency group gets around to putting a bid out, we'll be there.

But I think it's -- Roper is a wonderful company with a very good business model.

And I don't want to become a story stock around one or two things.

And it's incredible, the real contribution from our commercial RF business remains in wireless security technologies and freight matching opportunities, logistics, track and trace and the towing stuff gets all of the hype.

But believe me, that's just one piece of a very attractive business.

Okay.

And then just a little bookkeeping.

All the detail you did give on guidance -- if you gave something on CapEx, I missed it.

We think about that as roughly flat year-over-year?

Actually it should be.

We had, in the first quarter last year, a little more CapEx around consolidating Houston.

Normally, our CapEx would be -- maybe 1.5% of sales.

So I think $30 million of CapEx is a good plug number for any model you're running.

Great.

Thank you very much.

You're welcome.

We'll take our next question from Matt Summerville, KeyBanc.

Good morning.

Couple questions.

What were inventory step-up costs in the Energy business for 2006?

In the Energy business it was about a million dollars or so.

Okay.

And then I think you mentioned that, overall, the backlog in the Industrial segment is up 70% year end '06 versus year end '05.

I guess I just want a little more clarity.

Is that pretty broad-based across the businesses?

Or is this just a couple of large sized Neptune transactions that's pushing that number up?

It's broad-based.

Everybody is up -- everybody is up and up substantially.

Okay.

And then just lastly, Brian, maybe you can talk about -- a little bit more, in terms of the size of these niche acquisitions that's you expect to complete near term, are these $50 million and under type of deals?

Yes, I think for the most part.

Absolutely.

When we're thinking of a niche thing, we're -- we did four last year for a modest amount of money.

And then we did Dynisco at $243 million.

I think that things we'll do in the first couple months of this year will be -- probably less than $100 million.

Okay.

Great, thanks a lot.

You're welcome.

Our next question comes from Wendy Caplan with Wachovia.

Good morning.

Good morning.

You know, Brian, unlike a lot of other companies that we speak with, you mentioned this morning and have before that private equity is not a -- doesn't show up for some of your acquisitions.

And you don't see it -- sounds like your enthusiasm about acquisitions doesn't -- isn't tempered by the competitive factor.

Is it these relationships that you talk about, in terms of having known these companies, talking with them over the -- over many years; is it the size of the acquisitions?

Is it your continuity requirements, in terms of management?

How do you understand that, please?

Well, I think all those things are correct, Wendy.

But I think the most important thing is that -- our business model is really to grow what we acquire and to keep the leadership team with us, for the most part.

And so what happens is when companies are considering being acquired, larger ones have a couple choices, they can go out and have an auction process, never knowing what kind of strategic would buy them and what their model is, if it's a cost reduction, put in a new management team; that isn't going to appeal to everybody.

It will appeal to some.

And so you can kind of peel the onion.

What we wind up with is people who really love their business, they want to continue to develop it.

They respect that they're owned by somebody else, but they want to have reasonable autonomy to make judgments.

They want to have a chance to succeed.

They want to get supported if you're going to do bolt-on things for them.

All those things fit our model nicely.

And then what happens is, we're not interested in real deep vertical integration because we like an asset-like business model.

So a lot of our intellectual capital goes home every evening.

And you've got to do a good job in retaining those people.

And it produces a different kind of culture, frankly, than capital intensive model, it's around sourcing efficiencies.

And so we wind up, like everything else in this place, niche orientation.

Maybe there's only 5% of the acquisitions available that would fit what we need to do and want to do.

But if they do fit, we've got really high likelihood of being able to be successful around acquiring and integrating them.

Thank you.

Also, the -- you went through, very carefully, the fire power you have on the balance sheet and the cash that you expect this year.

Two questions about that.

One, John, with this large TransCore project, what impact will that have on the receivable issue?

Is it a headwind or just a thing?

Well, it is a part of the world that we're not totally experienced in.

But we have a very favorable contract, in terms of a little bit of upfront cash.

So we're going to keep a very close eye on that.

And I don't expect that to be a major headwind for us.

Okay.

And finally, I guess I haven't heard you speak in a while, Brian, as cryptically but directly about your pump businesses.

And I know there's been some pressure from investors to think about divestitures there.

And I understand, believe and have just visited, actually, one of your pump businesses and see that it's been a tremendous -- made some great changes.

But how are you and the board thinking about divestitures?

Is it on the table?

Is it -- how should we be thinking about that?

I think that some of our -- hello?

Certainly, some of our businesses -- I don't know.

Hello?

I don't know whether we got cut off or -- ?

I will move on to Shannon O'Callaghan with Lehman Brothers.

I'll let you finish your point there.

Well, we've got -- we still getting a little bit of feedback call interaction -- we're getting.

Okay.

Maybe it stopped now.

Hold on.

Yes, we might as well move on.

And Wendy, give us a call.

We'll try do a better job of answering the question.

Okay.

Just I guess -- just for me, Brian, in terms of -- it sounds like a lot of the things you're looking, at at least near term, is smaller niche things.

But a couple of the larger deals you've done, Neptune and TransCore, are obviously doing exceptionally well.

How are you thinking about larger deals?

Or are there any in the pipeline that you're considering?

We'll look at number of large transactions and then we'll look at -- size is not the first consideration.

I think, from our viewpoint, we would much prefer to have a business start out with at least $100 million of revenue.

Frequently you get a more robust, broader-based leadership team with that.

So we'll have -- some of the guys are -- would like us to look at more smaller things.

But boy, it takes all the same effort to do a $500 million transaction as it does a $200 million or $100 million transaction.

So we would rather focus on things that are larger.

Okay.

And then when you guys lay out this sort of -- the gross margin and EBITDA margin chart, when you're thinking about that, obviously very strong, when you think about it going forward in terms of further improvement, where do you see it coming from?

Do you see opportunity expand gross margins?

Do you see opportunity to close the gap between the two or -- ?

And in which segments, maybe, do you see it?

Well, I think that it's more really around -- our primary metric is a cash return on investment.

So what we want to do is continue to improve our cash return on investment.

And that's a little bit less driven by gross margins than it is by asset velocity and the amount of cash that we can generate in the business and the rate of growth in the business.

So because people here are looking at a lot of different financial metrics, continuous improvement becomes just a natural outcome of what you're doing.

So if you start with pretty high gross margins, they tend not to deteriorate and may actually go up a little bit.

And then when you look at the operating margin -- this past year our operating profit margin went up to 19.9% from 18.2%, which is pretty spectacular.

That's just the continuing focus of the bridges that we put everybody through and the skills they develop and their commitment to creating cash and shareholder values.

So I think it would be unlikely that you would find a higher gross margins on the part of things that we acquire.

It's going to be difficult to -- our model, historically, has been to say, if you take the gross margin and you subtract R&D from it you ought to try to get half of that at least in EBITDA performance.

And we've largely accomplished that.

We got a portfolio that, for the one of 10 basis points, would have had a 20% full year pre-tax EBIT number.

So margin enhancement is less critical to us than growth and cash management.

Okay.

Great.

And then -- I guess the last thing, in terms of -- you're saying sales could be $2 billion, what's your expectation, from an organic standpoint, for '07?

We really haven't articulated a particular growth rate.

I've been saying that we ought to grow at 1.5 to 2 times GDP.

We've outperformed so much in Neptune and in some markets in TransCore and in our Industrial businesses, which we really have done phenomenally well in that we looked at this year and our roll-up and said, look, we ought to do at least $500 million in EBITDA, up from $420.

And man, if you did that at 25%, that would be pretty special.

And that would get you $2 billion in revenue.

We stopped giving the revenue guidance about two years ago because it's just a nuisance.

It's not a very good thing.

And when you're inquisitive and doing transactions, it just causes a lot of confusion and adjustments.

So we're sticking with our $500 million plus of EBITDA and leaving it at that.

Fair enough.

All right.

Thanks a lot, guys.

We'll go next to Chris Kotowicz with AG Edwards.

Good morning, guys.

Good morning, Chris.

I had maybe a couple clarifications and then a real question.

The $2 billion in sales, is that with or without some of these deals you're talking about -- future deals?

That would be organic plus the acquisitions we made last year.

We finished the year at $1.7 billion and bookings were higher than that.

And we ought to do $100 million plus with Dynisco.

We got a little residual from those bolt-ons that will be in there.

Fair enough.

And then in the quarter, can you -- in the past, you've at least given us some kind of ranges, if nothing else, about core sales by segment.

Can you shed any light on that?

Well, you mean in the call in terms of prior -- we haven't provided guidance around sales.

No, no, I'm not talking about guidance.

I'll really talking about actual performance in the fourth quarter.

I remember one quarter you had the check boxes, 5% to 7% or whatever it was, 10% to 15% and you had kind of a check where you laid it out.

Could you -- ?

I think internal growth -- we did kind of lay it out there for the year.

But in Q4, generally, everybody was up 10%, except for Imaging, on internal growth.

Okay.

Internal is including FX?

Yes.

Okay.

So getting into the businesses --

FX, though, it is kind of an easy trail.

It's our European businesses and Petroleum Analyzer that's selling at -- it's not a secret where the FX is.

Yes.

Fair enough.

Okay.

So getting into the businesses a little bit, you talked about the next generation real tag penetration.

Is there anything else you can say there?

Is that a counter-cyclical thing?

Because rail and truck tonnage have been down in the States really for six to 12 months -- I guess truck tonnage has been down for 12.

Is that a good thing for you?

Or is it just your technology is in the right place at the right time and it wouldn't matter?

Can you talk about that a little bit?

What happens -- and one of the dangers when we talk -- everything we do here is niche-oriented and you can focus on anyone area and think it's indicative of what will happen to the enterprise.

It really won't.

Because it's -- we're the land of 100,000 singles all day long.

At the end, it turns into a grand slam home run.

The next generation rail tag is really something that the rail industry knows and plans for.

What's great about the next generation tag is it has superior characteristics to what they've had before.

The adoption rate for that this past year, and as we speak, has been at a pretty fast clip.

Eventually that business -- they'll wind many up with two tags on every freight car in the U.S.

But we're expanding in other areas, both in China and in South Africa and working hard in India and other places.

The big -- the interesting thing about truck tonnage in the U.S. is really the freight matching business and the track and trace business.

And they're not intuitive, how that works.

If you're buying subscription information from us and the tonnage is way up, you want to buy the subscriptions because you want to be really selective about the loads you've got.

And if the tonnage is way down, then you really want to buy the subscription because you're going to be looking for a load.

So it really doesn't make too much difference what happens, in terms of Class A truck production or trailer manufacturing.

Well, I guess on the tonnage I'm -- obviously, I'm talking more specifically about the actual utilization of the existing fleet.

I didn't know if --

You got -- you know what happens?

We provide OEM technology to a variety of people that are big and then the middle-sized fleets we sell a lot of that direct.

So there hasn't been a big cyclical component to that.

Is there a big retrofit activity going on?

There's an opportunity.

There's less going on than the opportunity that exists.

As the price points come down for monitoring on track and trace and location, the adoption rate should come up.

And the ability to do turn-key transactions at lower price points improves all the time.

And so actually, I think that business is in its infancy.

So the penetration of that is very low?

Very low.

And then my last thing on this and I'll move -- let someone else jump in; the split between the hardware and the monitoring or service, can you give us a sense of that?

I assume that the service is probably wonderful ROIC and maybe lower margin.

Well, we never get into product line performance and contributions.

But generally speaking, subscription services have high contribution dollars for the next dollar of subscription service because you have a lot of software components here.

There's a not -- there's a certain level of fixed costs.

So if that's not one of the best businesses in the world, it's -- there aren't many that can beat it.

Okay.

And --

Hardware is good.

If you're looking at the Radio Frequency portion that is TransCore, their government business is the lower margin business, where you've got a lot of administrative activity going on.

And then the product business carries higher margins, where you have more proprietary technology.

And then the logistics track and trace business would carry the highest margins.

Okay.

And maybe coming at it from a different angle; on an aircraft engine, you sell an engine that's a dollar of sales and you may see $5 over the life of the engine in after market and service.

Do you have a similar but not so accentuated tail to your hardware sale?

We do.

Not as direct as that -- as in the aircraft service business.

What happens is that -- a guy buys a subscription, he's going to keep the renewal.

They're very expensive monthly kind of rates.

If you sell the hardware, you're going to get recurring revenue associated with the tags on those as new customers adopt them.

And people change ownership and just get things destroyed in the process.

And then in the services arena, generally, if you've been an effective administrator for somebody, the last thing they want to do is change it out.

And to have the governments constantly outsourcing work to try to keep its employment numbers down.

That's why there's just so much activity in that area.

Okay.

Well, looking forward to a great 2007, guys.

Thanks.

Thank you.

Okay.

We'll move on to Wendy Caplan.

Thanks.

I know you want to stop because it's 11:15.

If you could just answer my divestiture question, I'd appreciate it.

So would we.

The divestiture question -- I mean the spirit of that generally comes around the pump business, which is performing exceptionally well and we have great people.

I mean, we have some our best people there, Walt Sadinski and Geoff Markham, they've just done an incredibly good job -- and [Al Eschback] and Christian Behrens and others.

We like the businesses, but over time, there is no question that they're a little less Roper-esc in the future than they were in the past.

The question is -- they're great businesses run by great people and they can outperform other people in the same space.

What's the best way to take advantage of that?

Do you capitalize that or do you do something else with it where those people can go out and buy other things that work for them where they can take their skills?

For us, they're a little more asset intensive than we would like to have.

But they're very good -- for those of you who want ROIC in its purest form, you would love the pump businesses because the accumulated depreciation won't show up in your mathematics.

In our world, we add the accumulated depreciation back and that makes those businesses less cash return than other businesses that we have.

So that's something we always have to think about.

And then we get more and more people contacting us about various businesses we have.

And one of these days, somebody is going to contact us about the right ones.

But nothing is for sale at the moment.

But we do have some assets that probably would best be served by other people owning them than us.

And when you know that, you've got to keep an open mind.

Thanks.

You're welcome.

That does conclude today's question-and-answer session.

Will now turn the call over to John Humphrey for any closing remarks.

Okay.

Thank you.

And thank you all for joining us this morning.

Just as a reminder, this will be available on replay later.

And all the materials are available on our website.

In addition, I'll be available this afternoon and through the weekend, if you have further questions.

Thank you all very much.

Bye-bye.

Once again, ladies and gentlemen, that does conclude today's conference.

We do appreciate your participation.