Dover Corporation (DOV) Q2 2013 Earnings Report, Transcript and Summary

Good morning, and welcome to the second quarter 2013 Dover Corporation Earnings Conference Call. With us today are Bob Livingston, President and Chief Executive Officer; Brad Cerepak, Senior Vice President and CFO; and Paul Goldberg, Vice President of Investor Relations. [Operator Instructions] As a reminder, ladies and gentlemen, this conference call is being recorded, and your participation implies consent to our recording of this call. If you do not agree with these terms, please disconnect at this time. Thank you. I would now like to turn the call over to Mr. Paul Goldberg. Mr. Goldberg, please go ahead, sir.

Thank you, Laurie. Good morning, and welcome to Dover's second quarter earnings call. Today's call will begin with some comments from Bob and Brad on Dover's second quarter operating and financial performance and follow with our outlook for the remainder of the year. We will then open up the call for questions. [Operator Instructions] Please note that our current earnings release, investor supplement and associated presentation can be found on our website, www.dovercorporation.com. This call will be available for playback through August 1, and the audio portion of this call will be archived on our website for 3 months. The replay telephone number is 1 (800) 585-8367. When accessing the playback, you'll need to supply the following access code: 12556710. And before we get started, I'd like to remind everyone that our comments today, which are intended to supplement your understanding of Dover, may contain certain forward-looking statements that are inherently subject to uncertainties. We caution everyone to be guided in their analysis of Dover Corporation by referring to our Forms 10-K and 10-Q for a list of factors that could cause our results to differ from those anticipated in any forward-looking statement. Also we undertake no obligation to publicly update or revise any forward-looking statements except as required by law. We would also direct your attention to our website, where considerably more information can be found. And with that, I'd like to turn the call over to Bob.

Thanks, Paul. Good morning, everyone, and thank you for joining us for this morning's conference call. I was very pleased with our second quarter results, which were driven by strong revenue growth, especially in the consumer electronics and refrigeration markets. Our energy and fluid markets also contributed solid growth. In all, we generated 5% organic revenue growth, improved margins 30 basis points and grew adjusted EPS 24%. From a geographic point of view, our North American markets were modestly positive, our China markets were strong, resulting in broad-based growth of 20%. We continued to see significant growth from the investments we have been making in Latin America, the Middle East and Australia. Lastly, European markets were largely flat in the quarter. Many of the positive trends evident in the second quarter are continuing, giving us confidence as we move into the second half of the year. The served markets within energy, as well as the consumer electronics, refrigeration and food equipment, fluids and fast-moving consumer goods markets should all be strong, as evidenced by 8% bookings growth. Much like the second quarter, we see third quarter organic growth led by additional OEM product releases in the consumer electronics markets; continued strong performance in our downstream and production markets within energy, helped by an expected modest sequential increase in rig count; seasonal strength in both refrigeration and product identification as several leading retailers continue to remodel plans and consumer goods companies prepare for the holiday selling season; and of course, our global expansion initiatives across our company. Now some specific comments on our second quarter. At Communication Technologies, our consumer electronics growth was driven by new product launches, notably at Samsung. We expect the growth in consumer electronics to continue into the second half, driven by the Samsung ramp and several…

Thanks, Bob. Good morning, everyone. Let's start on Slide 3 of our presentation deck. Today we reported second quarter revenue of $2.2 billion, an increase of 9% over the prior year. Organic revenue grew 5%, while growth from acquisitions was 4%. Earnings per share were $1.70. Adjusting for $0.36 of discrete tax benefits and a $0.02 impact related to spin off costs, adjusted EPS was $1.36, an increase of 24%. A reconciliation of our adjusted earnings per share is in the appendix of our presentation deck. Segment margin for the quarter was 17.3%, up 30 basis points. This solid result was driven by strong execution and the benefits of prior restructuring. It also included covering incremental restructuring charges of $4 million year-over-year. Bookings increased 8% to $2.2 billion. These results represent strong 15% growth in Engineered Systems and 9% growth in Communication Technologies. Printing & Identification bookings increased 3%, while bookings declined 1% in Energy. Overall book to bill finished at 0.99, which is in line with seasonal trends. Backlog remained steady at $1.6 billion. In the quarter, we generated $251 million of free cash flow, representing 11% of revenue. Our full year forecast for free cash flow remains unchanged at approximately 10% of revenue. Now turning to Slide 4. Communication Technologies, driven by new product releases in the consumer electronics market, grew 11% organically. Energy and Engineered Systems both exhibited broad-based organic growth, posting 5% and 4%, respectively, while Printing & Identification was flat. Overall, our organic revenue growth was 5%. Acquisition growth was 9% in Engineered Systems and 2% in Energy. Now turning to Slide 5 in our sequential results. Revenue increased 9% from the first quarter, with all segments showing sequential growth. Engineered Systems increased 16%, primarily driven by a strong seasonal uplift in Refrigeration and the…

Thanks, Brad. As I mentioned earlier, I am very pleased with our second quarter performance as we delivered strong results in a low-growth macro-economy. We also continued our practice of returning cash to our shareholders through our share repurchase and dividend programs. I am committed to completing the $1 billion program by early next year and fully expect to continue our long-standing record of annual dividend increases. Our strong second quarter growth, solid book to bill and the positive trends across many of our businesses give me confidence in our second half growth and earnings forecast. I'm also very encouraged by the steps we have taken to strengthen our company. We continue to execute on numerous growth and productivity initiatives. I am pleased with our progress in investing for growth in emerging economies, which helped drive significant growth in those markets. Our second quarter organic growth and margin expansion reflects our success with product innovation and productivity programs. In addition, we have a robust acquisition pipeline, with targets that will complement and expand our already strong product and technology positions and further our efforts of geographic expansion. You should expect us to close several deals in the coming quarters. Also of significance, we believe the spinoff of Knowles will create substantial shareholder value and strength in both companies. When completed, I believe Dover will be a best-in-class diversified industrial company, with a strong growth and return profile, and Knowles will be positioned as a global technology and market leader in the communication technologies space. I am excited with Dover's long-term prospects as we continue to execute on the important initiatives ahead of us. In closing, I'd like to thank our entire Dover team for their continued focus on serving our customers and driving our results. With that, Paul, let's take some questions.

Thanks, Bob. [Operator Instructions] And with that, Laurie, if we can have our first question.

[Operator Instructions] Your first question comes from the line of Shannon O'Callaghan of Nomura.

Bob, first on the consumer electronics performance here, so 27% in the first quarter, that was above the 15% to 20% you talked about. What do you attribute the outperformance to? And then you also didn't change the revenue guidance for the year for that segment. Are you more cautious on the second half, or is that just being conservative in terms of what you're planning for the second half given you outperformed in 2Q?

Okay. So you're asking 2 questions. One, the performance in the second quarter relative to the guidance we provided on the April call. And Shannon, I was -- my first comment would be, I was probably being somewhat conservative in my April comments just because we don't always know how the product stream is going to flow from one quarter to the next. It's not as easy to predict as it is in some of our other businesses. The guys had an outstanding second quarter. Third and fourth quarter, we do expect some significant growth sequentially second half over the first half. The driver of this growth is going to be new product releases. I think you picked up in my prepared comments that we look at these product launches from the OEMs being late third quarter and early fourth quarter. I'd like to think I'm also being somewhat conservative with our comments on the product launches and the outlook for the communication technologies space in the second half of the year, Shannon.

Okay. Great. And then just quickly on Energy. I mean, the international growth has been great. The margins were a little lower this quarter. I mean, could you talk about your sort of expectations, you talked about rig count up a little bit and sort of maybe profitability expectations going through the rest of the year?

Okay. Second quarter margins down a little bit. My first comment would be to treat them -- treat that as a temporary blip. We did have some lower activity in Canada. Actually, it was quite a bit lower than we anticipated coming into the quarter. But the other thing that was -- I would label as temporary, we did have some elevated product development spending in the second quarter. It wasn't all constrained to the second quarter. But the second quarter spending in this product area was quite a bit higher than the first quarter or even what we'll see here in the third quarter. Margins for that segment were 24%, and maybe a fraction in the first half, Shannon. Margins for the year will be 24% for Energy.

Your next question comes from the line of Nigel Coe of Morgan Stanley.

So just the -- obviously, you referred to some of the factors that drove the bookings weakness in Energy Q-on-Q. But obviously that does impact probably the revenue outlook in 3Q. So I'm wondering as we look into the 3% to 5% core growth for the full year, is there more of a bias towards the lower end of that range at this stage, Bob?

No, absolutely not. In fact, your comment that our lower bookings in the second quarter, you said impact our revenue outlook for the third quarter, that's not true, Nigel. I think as Brad mentioned in his comments, we do see some of the international business activity, especially around production in Energy, most notably around production in Energy, as being a little bit lumpy, and it's not a steady drumbeat. And in fact, Brad mentioned that the Queensland order for our production group in Energy, we did not receive a second quarter order on that project. It did come in, in early July. And the size of this, Shannon, is -- or Nigel is, what is it, $70 million or $75 million?

$75 million, yes. That won't all shift in the third quarter.

Yes. And as an example, that order is actually for product shipments in the late August through mid-first quarter timeframe of next year. Don't pencil this in at the low end of that range.

Okay. $70 million order came in, in early July, okay.

I think it was actually the first week of July. Yes.

Okay, okay. That's really helpful. And then switching to Comm Tech, you talked about Samsung several times, and I don't think I've ever heard you actually refer to an OEM customer on the call before. So I'm wondering if that's a signal...

That makes me [indiscernible] what I can refer to.

But is that indicative that Samsung is now your biggest customer?

No. For the year, they will not be. No. It's fairly -- it's fairly -- it's a fairly close position between customer 1 and customer 2 for the year. They were rather significant for us in the second quarter. We actually have a very, very broad customer base, especially for our microfilm business, and it's growing for our speaker and receiver business.

Your next question comes from the line of Scott Davis of Barclays.

Scott, you'll have to speak up a little bit.

Okay, sorry. Guys, can you -- you're one of the few companies that have said anything positive about China in a while. And can you reconcile how broad-based within your portfolio is the China recovery that you're seeing and the strength in the quarter?

Okay. So Scott, let me preface. Before I give you a response on the second quarter, let me preface this by saying I have shared both at Dover Day as well as a some of the conferences that we've been speaking at that over the last 4 or 5 years, we've actually served 2 key markets within China, one of them being the very, very significant export market for China, the export industry. And that's -- we're doing much less in that today than we did in the past. And our focus today is really -- I use the phrase supporting, servicing and touching the growing consumer class. And I would tell you as an opening statement, that's what you see in the second quarter. I think that's what you're going to see for the balance of the year is continued activity and growth around our various businesses that do support the growing consumer class. It's interesting to note all 4 segments had double-digit growth in China in the second quarter, from our consumer electronics business to our retail fueling activity to our auto business to Markem-Imaje and our Printing & Identification segment. It was -- well, again, I don't know how else to say it. It was rather broad-based.

Okay. Very fair. And just as a quick follow-up, I mean, you did 4 small deals in the quarter, I think, and then you talked fairly optimistically about some deals closing. Can you give us a sense of what types of businesses, even with what segments maybe they might fit into, and a sense of kind of average multiples? I mean, what -- higher than historical average, lower? I mean, just maybe a little bit of context to help us understand how the M&A went, I guess.

Okay, so multiples. First of all, I'm going to emphasize the word "small". I could have used the word "very small". I think in total, the revenue we acquired in the second quarter was around $45 million or $50 million, is that the right number? Annualized, I mean, so they're rather small. The question around valuation in multiples, may be actually a bit lower than our historic number over the last 4 or 5 years. And I think our historic number for the last 4 years has been 9 or 9.3, something like that, on our trailing EBITDA.

[indiscernible] Yes, correct.

So a little bit lower than that. So we like the valuation on these deals. As I commented, they were all add-on, highly synergistic product expansions [ph]. One of them was a bit of a geographic extension for us. We had a couple of them within Engineered Systems, a small one in our pumps business, another one in environmental solutions group and a small one within Printing & Identification.

Your next question comes from the line of Jeff Sprague of Vertical Research.

Just following up maybe on that theme and just thinking about capital deployment. As Brad noted, I guess you're on track for the share repurchase for the year. But was there any particular reason you kind of stepped back in this quarter? The deals sound like they were small. Seems like you would have been able to actually do a lot more than you did.

You're talking about the acquisitions, Jeff, or the share buyback?

No, I think the question was why was a share repurchase activity thin in the second quarter?

Well, yes. I'm kind of wondering if there's maybe a big deal that didn't happen and therefore you didn't do share repurchase.

No, Jeff. Well, look. As I said, we're right on track with our share buyback, and we still have more to do this year, as I indicated in the prepared comments. Keep in mind, in the second quarter there was a period of time that we weren't in the market as we were nearing a point in the decision around our spin. So I think you'll see us be a little bit more aggressive in the second half than in the second quarter on that, Jeff.

All right. That makes sense. And can you give us a little color on Anthony organically, as we think about that on a pro forma basis, how it grew in the quarter?

Organic. Now I actually don't have that data on what they did last year. We view Anthony as being very much on track with our acquisition model and the expectations we had for the year. Our close-the-case business at Anthony continues to, I will say, expand and execute quite well. The coordination between Anthony and the Hill PHOENIX team is proceeding extremely well, especially on the front end of the business and our sales and market activity and the channel management. We're quite happy with the acquisition.

Yes, the only data point I would give you, Jeff, is that I don't have year-over-year either, but we're really pleased with the sequential growth we saw in Anthony. It is into the season, but 25% sequential growth into Q2. We'll see that continue to grow into Q3, and then obviously moderate with the seasonality in that business into Q4. But right on track where we expected it to be, both in terms of our revenue expectations and, importantly, our earnings expectations.

Great. And then just one last one on Samsung. So if we think about your sales for Samsung moving higher in the back half of the year, can you give us some sense, is that just their higher volume pulling you through? Are you still early in, kind of, an adoption curve with them on new products or increased content on existing products?

Okay, yes. Let me be very specific here. Samsung, year-over-year in the second half, will be up. I don't know what that percentage is, but it's rather significant. We will have very strong year-over-year growth. To put this in perspective, though, Jeff, on a sequential basis, we look at first half versus second half. Expectations from Samsung, modest growth in the second half over the first half. I think it may only be 10% growth in the second half over the first half.

Your next question comes from the line of Deane Dray of Citigroup.

There was a discussion earlier on expectations for an increase in rig count, some of that seasonal. Can you quantify that and what the timing is and maybe the split between gas and oil?

Oh, gosh. I don't -- I'm not sure that the split between gas and oil has changed any over the last -- over the last -- over the last couple of quarters, Deane. I think the -- when you look at the total rig count that is deployed, gas rigs are down about 20%, and we don't see that changing here in the second half. As we move into the -- as we move into the second half of the year, I think we -- our plans, I think are calling for about a 3% sequential improvement book in North America rig count. Let me -- no, let me correct that. 3% sequential improvement in U.S. rig count second half over first half averages. So it's not -- it's not a big driver of our expectations, but we do see it improving slightly.

Is that a seasonal adjustment, would you say?

No. I'm not going to -- would see the seasonal adjustment in Canada. And it's -- that one tends to be a bit more significant, Deane. The rig count, the rig count in Canada in the second quarter typically drops about 70% from the first quarter, sequentially. And we saw that again in the second quarter, perhaps even a little bit more of a drop than we typically see. That will recover from the second quarter lows as we typically see it. And I think for the year, the second half will lead to an improvement over the first half. But again, it's because of just the seasonal downturn in Canada in the second quarter.

And you mentioned Canada, and we've seen some of the impact -- our discussion about the impact from flooding. How would you characterize that on your business and what kind of snapback recovery you're expecting?

I don't have an exact dollar impact with respect to revenue. But look, it's pretty safe to make the statement that in the last -- the last whatever it was, the 8 or 9 days of June, southern Alberta, there wasn't much business activity going on. That flooding was pretty severe. We do see it recovering. We do see a return to normal activity in the third quarter and the fourth quarter.

Your next question comes from the line of Steve Tusa of JPMorgan. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Just a question on the Comm Tech stuff. So I guess in the back half of the year, to get to your guidance first half to second half, you need about $120 million in sequential increase?

I think that sounds about right. I don't have that exact number. It may be slightly high, but it sounds about right, yes. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: And so if I assume the other businesses, they seem kind of flattish. I mean, are there any dynamics sequentially in the non-consumer electronics businesses that are moving around? They seem kind of flat and stable.

There will be some improvement in the non-acoustic businesses in the second half versus the first half. But the bulk of the sequential growth, Steve, is as you're inferring. It's going to come from consumer electronics. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Right. So 50% of the business is going to carry most of the load. And you said I think Samsung is up 10%. What is it? Are there that many launches from the other customers? And I guess if there are, are we looking at something other than the traditional handset stuff? Is there -- are there other things that are driving that in a material way? Assuming because Samsung up 10% is fine, but it's still below average of kind of what you need that consumer business to grow.

Okay. So even aside from product launches that I'll comment on here as my second comment, you do see some seasonal balance between second half and first half, especially in consumer electronics. The second half is always a little bit stronger than the first half. So we do expect that, and we will see that. When you look at product launches in the late third quarter going into the fourth quarter, that -- our participation in those product launches is rather significant and it's rather broad-based. And the increased revenue aside from a little bit of a seasonal pickup you get in the second half, the bulk of our increased revenue in the second half sequentially is coming from our participation in the new customers' product launches in late third quarter and fourth quarter. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Okay, but it's handset focused. It's still the -- it's not like some new...

Almost all of it is handset focused. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Okay. So the other business outside of Samsung is growing a lot faster than Samsung. You've got -- the Samsung stuff was really the lift in this quarter that you called out.

Correct. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Okay. And then just one quick one on Engineered. Very good quarter, much stronger than I was expecting.

It had a great quarter, Steve. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Yes, absolutely phenomenal. I guess, you mentioned the [indiscernible] stuff. I guess you called that out a bit in the 10-Q. But it's interesting that the core -- it seems like the core Hill PHOENIX business, what was that up? Because you were still kind of anniversary-ing the Target headwinds, so that's even more impressive in the face of that. Just curious, what your organic -- I guess, just bottom line what was your organic at Hill PHOENIX? I can kind of back into the rest.

I think organic at Hill PHOENIX was 4% or 5%.

5%.

5%. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Wow. And that includes the Target headwind that you expected?

It was more in the first quarter than in the second, but there was headwind there, yes.

And we called this out on the April call. The real headwind we were feeling at Target was much more noticeable in the first quarter. We still dealt with it in the second quarter, but it was reduced.

Your next question comes from the line of John Inch with Deutsche Bank.

So Bob, could you give a little more color around your comments on long-cycle pump business strength? What geographies or verticals are actually showing improvement? And I'm just curious what the trajectory is.

Actually, it would have probably been more helpful if I had mentioned the actual business instead of --. But there is -- our primary business within pumps that is the longer-cycle is Maag Pump, the acquisition we made 15 months ago, I guess. It's not the only one, but that's where we see the primary long-cycle activity is within Maag.

And that's where we had the deferred shipment from the first quarter.

Yes. And John, we did call out on the April call that part of our weakness in the first quarter in fluids was a deferral by a customer of a scheduled first quarter shipment into the second quarter. That was part of the growth in the second quarter. But beyond that, the guys -- we have very, very strong activity in the second quarter within our pumps business.

And is there Bob, the other part of my question, was there a vertical application that seems to be picking up? Because companies that have been serving the fluids industry have been talking about projects being pushed to the right. I'm just wondering if maybe you're starting to see some of these projects perhaps get kind of put back on the books here or something like that.

It wasn't just one vertical. But if I did -- if I did mention one vertical that was important, it is the plastics vertical.

It's plastics. Okay, that's helpful. I want to ask about Knowles. I mean, Knowles really is doing so well. If you were to keep the business next year, I mean our back of the envelope says it might contribute 80-plus cents to your earnings. So my question is how are you thinking about the prospects of maybe stepping up share repurchase or acquisitions? I mean, you obviously called out the very strong pipeline to prospectively replace some of that. What are your thoughts there, Bob?

Well, your comment was if we were to keep Knowles, let me repeat my previous comment. Our progress on seeing a first quarter spin-off transaction is progressing very well, John. And yes, they had an outstanding quarter. If you annualize it, you get a pretty impressive number for next year, and I think they will have a pretty impressive 2014. We are working through our acquisition program across the group in Dover to pursue the deals that make sense for us and to pursue the deals that have the right valuation for us. We'll see how that rolls out over the next 2 or 3 or 4 quarters. With respect to additional share repurchases, all I'm going to do is repeat the comment that I made and that Brad made. We're on track for being at about 70% to 80% of the $1 billion authorization by year end. Any other comments beyond, that I would defer to a later date or a later call.

The only other thing I would add is in addition to looking at acquisitions across the portfolio of Dover, we are, as you noticed in the quarter, stepping up our investments internationally because we see great opportunity for us. And as Bob said, the broad-based growth in China has a lot to do with that.

Yes. That makes a lot of sense. Just lastly, electronic assembly and test, do you still expect those businesses -- I mean, Intel kind of had some weak numbers. I mean, do you expect those businesses still to kind of be on track for something out of the portfolio?

We're running a process. And I think we -- as I've been saying for the last 3 months or 4 months, I think you'll see us make an announcement here in the third quarter.

Your next question comes from the line of Julian Mitchell of Crédit Suisse. Julian Mitchell - Crédit Suisse AG, Research Division: I just had a question around the net benefits of productivity. I mean, you pushed that up in your sort of EPS bridge to $0.20 to $0.25 from $0.12 to $0.22. Was that sort of largely a function of the extra Comm Tech restructuring? Or is it was really just in Printing & ID or how you're thinking about that? And I guess related to that point on Printing & and ID, you've got a very, very big margin jump in Q2 off flat sales. You had a high margin base in the second half of '12. Do you think your second half of '13 margins can be above that 16% rate last year?

Okay. There's a lot of questions in there. But as I said in my comments, the increase in productivity is specifically due to the restructuring benefits. When we entered -- if I back up for a second, when we entered the year, in our earlier guide, we were expecting to spend in the order of magnitude of $12 million to -- let's call it $12 million to $15 million of restructuring. We are now looking at a number of $20 million to $25 million, of which a lot of that was already executed in the first half. A lot of that actually executed within DCT. And so the benefits we're seeing coming through in the second half have a lot to do with the amount we've spent in DCT to take out costs. You'll see it in the margin expansion in the second half, when we said it would be substantially up. And so that's what you're seeing on the bridge.

Okay. Your other question, Julian, was around Printing & Identification?

Right.

Yes, I think if you're trying to build your model, and I know that's what you're trying to do, I would feel pretty comfortable using margins in the second half for this segment, second half of '13, to be rather similar to what they were in the second half of '12. Julian Mitchell - Crédit Suisse AG, Research Division: Got it. And then just a follow-up would be around U.S. kind of short-cycle industrial demand. I think you've made 1 or 2 comments that, that did look better, particularly, I guess stuff related to the automotive supply chain perhaps. Could you elaborate a little bit?

Yes, and don't -- we call it auto related and it's not so much -- it's not so much the auto supply chain for building vehicles and light trucks here in North America. But it's really a comment around our lift business within vehicle service group. The activity there remained rather robust. Other short-cycle activity here in the U.S., we commented on Hill PHOENIX. Even within environmental solutions group, specifically our refuse truck business, had a very strong second quarter, both on revenue and bookings. We see them having a fairly solid performance in the second half. We obviously aren't seeing the growth in U.S. in North America that we are experiencing and winning in China or other emerging economies. But we do forecast modest growth here in the U.S. market in the second half of the year.

Your next question comes from the line of Charley Brady of BMO Capital Markets.

Can you just talk a little bit about sort of raw material costs? How is that looking -- we've heard from some companies that it's coming in maybe a little bit better than what are currently in current budgets. Can you speak to that effect or what it's having across the business segments?

Yes, I would echo that. I would say we are seeing it a little bit better. It's not dramatic. But from where we were earlier in the year, I would say it's improved -- improved quite a bit in the area of steel. But it's not big enough really to call out and say it's helped driving us into the second half.

Okay. And just in terms of the Energy segment, the impact of the Canadian -- the softness, I guess, in which you said -- you sound as though that's kind of rectified itself going into Q3. First of all, is that correct? Did I hear you correctly on that?

Yes, that's correct.

Okay. And then so I guess, can you quantify kind of what the impact was in Q2? And is it all -- has anything shifted outside of '13 or has it just kind of moved a little bit to the right?

I'm not aware of anything that has shifted out of '13. It's all moved to the right.

Your next question comes from the line of Nathan Jones of Stifel. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: I would like to just go back to Europe for a second. You commented in your remarks, Bob, that Europe was flat in the second quarter. Is that a kind of better performance than you've seen recently? And can you comment on which markets were better and which markets were worse, and if you think you might have seen an inflection point there?

Well, I don't -- I'm reluctant to call an inflection point. It was better activity for us in the second quarter than we saw in the first quarter and in the fourth quarter. The businesses that you're asking for a little bit color on what was up and what was down, it is interesting, I think for the first time in 3 quarters or 3 or 4 quarters, Brad, Markem-Imaje was actually up in Europe in the second quarter. It was modest, but I think they were up maybe 3% or 4%, 3% in Europe in the second quarter. Our pump business may have been up slightly. But even with -- it's interesting that even within our pump business, you'll see some brands serving some verticals that were up and you'll see some brands that serve different verticals that were down again. The business that probably struggled the most in Europe in the second quarter was our heat exchanger business. I don't remember now how much they were down, but it's 5%, 6%, 7% down?

Right. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And if we could -- if I could just talk about Anthony for a minute. I mean, obviously, the Engineered Systems segment had a great second quarter margin performance. I'm wondering if you could give us any color on how Anthony contributed to that improvement and whether Anthony's progressing faster from either a cost-out standpoint or a revenue synergy with Hill PHOENIX standpoint than you had anticipated when you bought it?

Okay. So I would say that, your question is, did Anthony contribute to our margin performance. That's the question? Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: Yes, potentially more than you had expected it to.

No, it's right -- I would say it's right on track year-to-date and in the quarter. Keep in mind, we do have pretty substantial AD&A or amortizations on that business acquisition. So I would say all in, with amortization, it's below the margin.

It's a drag on margins.

It's drag on margins. But if I took out that AD&A, we're really, really pleased with -- I'm not going to go and tell you what the margin is for Anthony. But let's just say it's not an operational drag.

It's not -- yes. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: And if I could just get to one clarification question in, Bob. You said that you expect Energy margins for the year to be 24%. Is that right, which would mean they're down year-over-year in the second half?

24% and a small fraction. I think it was -- it would be a good number to look at.

Your final question comes from the line of Mig Dobre of Robert W. Baird. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: I'd like to go back to Hill PHOENIX, if we can. Very good performance there, as you already talked about. But I'm wondering, can you talk a little bit about the drivers? Is it some share gains? Is it that the market is perhaps behaving better than some of us have anticipated? How should we think about that?

No, I wouldn't label this as share gains. I wouldn't label it as a stronger U.S. or North American market. I would bring a lot of attention on Hill PHOENIX comment to their continuing efforts to grow their business outside of North America. They've been working on this for, oh, goodness, a couple of years now. We're seeing the benefits of that, a little bit in the latter part of last year. We see some real benefits here in the second quarter. We think we'll see even more benefits in the third quarter. But don't label this as share gain and don't label this as a stronger-than-anticipated North America market. It's our international activity. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: Great. That's helpful. And I guess last one for me would be on Print & ID. Maybe can you talk broadly about the growth opportunities in this segment going forward? And how do you think about maybe your opportunity to deploy capital here?

Okay. So growth activities opportunities, I guess my first comment would be with respect to a geographic opportunity. And we still see plenty of opportunities for this business in emerging economies. I commented earlier that all 4 of our segments had double-digit revenue growth in China in the second quarter. Markem-Imaje was part of that success in the second quarter, with double-digit growth rates. We would expect to see that continue for the balance of the year. They had an outstanding growth profile in Latin America and India. And then on top of that, we still see the U.S. market as a growth opportunity for Markem-Imaje. And the second part of your question was capital allocation. We made one small add-on acquisition. And here again, I'll use -- I will use the word "very small" add-on acquisition in the second quarter. But within our pipeline, we have another -- oh, I don't know, 2 or 3 opportunities that we're looking at and chasing. We'll see how they evolve and conclude here over the next couple of quarters. It is an area that we would like to deploy some more capital. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: Are those opportunities still fairly small or are you looking at something larger?

They're small but perhaps larger than what we did in the second quarter.

Thank you. That concludes our question-and-answer period. I would now like to turn the call back over to Mr. Goldberg for closing remarks.

Thanks, Laurie. This concludes our conference call. With that, we thank you for your continued interest in Dover and we look forward to speaking to you again next quarter. Have a good day.

Thank you. That concludes today's Second Quarter 2013 Dover Corporation Earnings Conference Call. You may now disconnect your lines at this time, and have a wonderful day.