Good day, and welcome to the ESCO Third Quarter 2012 Earnings Conference Call. Today's call is being recorded. With us today are Vic Richey, Chairman and CEO; and Gary Muenster, Vice President and CFO. And now to present the forward-looking statement, I would like to turn the call over to Kate Lowrey, Director of Investor Relations. Please go ahead.

Thank you. Statements made during this call regarding the timing and amount of fiscal 2012, 2013 and beyond expected results including sales, SG&A, cash flow, EBIT, EPS and profit, the timing and certainty of developments in connection with the SoCalGas project, the success of cost reduction efforts, future growth opportunities, success in domestic and international markets and other statements, which are not strictly historical are forward-looking statements within the meaning of the Safe Harbor provisions of the Federal Securities laws. These statements are based on current expectations and assumptions, and actual results may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the company's operations and business environment, including, but not limited to, the risk factors referenced in the company's press release issued today, which is an exhibit to the company's Form 8-K filed today. We undertake no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, during this call, the company may discuss some non-GAAP financial measures in describing the company's operating results. A reconciliation of these measures to their most comparable GAAP measures can be found in the third quarter fiscal 2012 results press release issued today and found on the company's website at www.escotechnologies.com under the link Investor Relations. And now I'll turn the call over to Vic.

Thanks, Kate. Before I give my perspective of the quarter, I'll let Gary provide a few financial highlights.

Thanks, Vic. The clear highlight of the quarter and year-to-date is the significantly higher-than-expected order book. During Q3, we entered $195 million of new business, with the resulting book-to-bill of 115%, as all 3 of the operating segments provided positive ratios. Of special note in Q3, our largest customer, SoCalGas, awarded Aclara $30 million in orders, which includes 355,000-meter modules in preparation of their AMI metering rollout beginning later this calendar year. Contract to date through June 30, we're pleased to report that SoCal has ordered $83 million of products and services from Aclara. Orders received year-to-date total $584 million, with a book-to-bill of 118%, resulting in an all-time high record backlog of $431 million. As noted in the release, we reported GAAP EPS of $0.51 compared -- or in Q3, compared to $0.49 in Q3 of the prior year. Relative to Q3 sales and earnings, I'd like to share some color related to the guidance that provided for Q3 during the last call. Filtration significantly outperformed our expectations on both sales and EBIT, and we expect this exceptional performance to continue for the foreseeable future. Filtration's EBIT was 22%, which came in 200 basis points better than earlier expectations. Test sales were generally on-plan, but EBIT was approximately $1 million below plan, as a couple of higher-margin chamber projects slid to the right and we experienced installation cost overruns on a couple of large, complex domestic chambers. The projects that moved out of the quarter in the year are timing related, and the future revenue expectations from these projects are still solid. As is the case with some of these foreign jobs, estimating the exact completion period on large international projects is challenging. Test lower-than-expected performance resulting from cost overruns has been addressed through changes in program management and…

Thanks, Gary. I think Gary covered most of the operating highlights. So I'll be brief in my commentary about the quarter and I'll focus on the outlook for the future. I'll start by saying I'm reasonably pleased with our third quarter operating results. Obviously, we had some mix results but taken as a whole, I see a lot more positives than negatives in 2012. And I'm certainly excited about the growth opportunities going forward. The strength of our orders and resulting backlog along with the size of our identified and qualified new business pipeline gives me confidence in our projected growth over the next several years. The $83 million of SoCal orders recorded to date provide significant embedded growth. Obviously, we're excited about the metering endpoint deployments as it begins to ramp up in early '13. But I'm most pleased with the outstanding relationship between the Aclara team and SoCal. I'm convinced this relationship will be mutually beneficial as this project accelerates. Operationally, Filtration is a clear winner in the quarter and the year. All 4 units within the segment are performing above expectations on sales and EBIT. Filtration's results again validate my belief their multisegment approach is the correct strategy to create long-term shareholder value. Doble continues to perform exceptionally well despite the European slowdown. Their new product introductions, especially in the asset management area, have been well received. We're excited about our future at Doble as the state-of-the-art products and software applications, such as their ARMS solution, redefine proactive grid monitoring and predictive diagnostics. In the third quarter, as Gary mentioned, we had some soft spots in Test and at Aclara. While this is disappointing, I will say that I'm happy with what our management teams are doing across the company to mitigate this. Our leadership teams are…

[Operator Instructions] Our first question comes from Zach Larkin from Stephens.

First question on the water orders that were getting pushed out or pushed to the right. Can you give us a sense for kind of how far out do you expect them to come back as we move into 4Q? Or is the timing still a little bit uncertain on those orders you're expecting to see?

Well, as we mentioned, I think in the press release, those kind of got pushed out of the quarter. And therefore, the sales for those will get pushed out of the year. Our view is that it is going to pickup, probably, going into next calendar year. The pipeline, it is amazing how big the pipeline is. It's the biggest it's been in the last several years and a lot of that has, I think, we were better focused on that. And so those are -- I would say there's a lot of smaller projects that are taking place. But then if you look at kind of the water and gas markets together, there is probably about half a dozen pretty significant projects that we think we have a good chance of landing this next year. And I would say that as we look at the water market, we've been very successful with some of the larger projects like New York City, like San Francisco and Toronto. So we're encouraged by the fact that there are several of -- a number of these projects or larger projects, where we've been very successful. And at the same time, I think the sales team has done a good job of working to better access those smaller projects that will become available.

And now with the sizable amount of bookings coming from SoCalGas, do you have a sense on maybe what the expectations might be for shipments and how we might think about that, as that project begins to ramp-up?

Yes. It's going to be much more significant next year than it is this year. I'm saying that sales are going to be somewhere over $50 million next year, and then ramping on beyond that and years after that. So that's a project that seemingly stays on track. And we have not seen any indication that it won't. We really started the big ramp-up of the endpoints, which as you know, that's where the real dollars start to happen. And that's scheduled to start significant ramp in January of this year. And the other thing I think is key to remember is, not only are we going to see a lot more sales to that customer next year, but this year we're investing in that. So we're making a lot of investment on a pretty small amount of sales. And in next year, that amount of investment it doesn't go away because there are costs associated with running that project, obviously. But really, the product development piece of that will essentially be done this year.

Got you. And then one final question if I may. Gary, the tax rate was a fair bit lower than what we've seen in recent quarters. What should we think about as we look going forward for a tax rate?

I think if you keep it on an annual rate this year, we had an unusually high rate in Q3 and an unusual rate expected in Q -- I'm sorry, in Q2, we had a high rate and the rate in Q3 came in at expectation. So when you kind of average that over the course of the year, it should come in at around 34.5%, which is kind of the standardized run rate. And so what happened in this quarter is, obviously, you set up provisions for uncertain tax positions, you come through the IRS audit and that sort of thing. And basically, the positions we had taken were adequate. And so there's about $1.5 million worth of what I'd call statue of limitation, things expiring as we came out of the back end of audit. And that was expected to happen. We know we had a pretty good position. So this quarter is a little unique, but it was planned. And when you neutralize this over the course of the year, I think 34.5% is kind of our generalized run rate as you go forward into '13, absent these discrete items.

Our next question comes from Carter Shoop from KeyBanc Capital.

I wanted to touch base on guidance for a second. For fiscal '12, we're talking about that being roughly flat year-over-year. That would imply either a normalized tax rate of kind of 33%, 34%. And assuming there are repeat on the other income side of about a doubling of operating income sequentially. Do you feel comfortable with that or should we be talking about maybe fiscal year '12 being a little bit lower than fiscal year '11?

Well, actually, we've only got a couple of months left, so we have a pretty decent insight into that. And there are some things that have to happen this year. And we said generally flat to last year. So I mean it's going to be somewhere in a pretty tight band around that. But we have a lot of insight into what's happening. And our fourth quarter is always big. Last year was a little bit of an exception, it was a little flatter. But if you go back to the year prior, I think our projection for the fourth quarter isn't even as high as it was that year. So the vast majority of that is in backlog, ready to be delivered, it's just a matter of getting it out the door. But there's always some minor amount of risk around that.

Okay. And then for '13, can you kind of quantify your outlook again? Kind of remind us what exactly you're looking for there and if you're still comfortable with those exact numbers?

Yes. What we've talked about before is going to be essentially 25% higher than what we were going to do this year. We're still very confident that it's going to be somewhere in that range. Obviously, with some of the pervasions that we've had into this year, we're going to look at that again. And obviously, I'll give you a full update at the end of the year. But I would say that we're not seeing any significant changes to what we project. But if you think about why we have confidence going from '12 to '13 that's going to be a significant improvement, the biggest piece of it -- but not the only piece -- but the biggest piece of it is what I just talked about with SoCal. So with a significant uptick at SoCal, both from a sales perspective and a profitability perspective, that's #1. Then also I mentioned some of the significant projects we have on the water and gas side, which if we get those to happen in the first half of this next year, then we'll have some sales associated with that. Also, with Doble, we've been making those investments, we're starting to get some traction with the new product development, new product developments that we've done, as well as some of the international expansion. And then we talked about some of the issues we've had in the Test business, and we will get improved margins next year in Test. I can assure you of that. And then if you just look at our Filtration business, it remains very robust and we're projecting some growth even over what we've been able to do this year. So it's not -- we're hoping for something. We really have concrete insight into why we're going to have significant growth this next year over this year. Is it going to be 25%? Is it going to be a little more than that, a less than that? That piece we've got to refine, but it's going to be in that general area.

Our next question comes from Sean Hannan from Needham & Company.

So if I could get a little bit more color around what occurred within the Test business, so there the chamber projects to be completed by the end of June. Just to get a better understanding of what exactly happened, how did they slip out? Did the customers say stop or is this more -- just a little bit more clarity would be helpful.

Sure. I would say there was 2 issues that we had, 2 general issues. The first one was just some of the delays and primarily in Europe. So we had a couple of our customers say we don't have the ability -- we've gone through this from time to time and it has been a while but a couple of customers just said, we're not ready for this to be done. The parent building's not done. So you can't complete the project, you can't start the project in the time frame that we talked about. So that has been the biggest issue that we had in those, as I mentioned, they're primarily in Europe. It's not that they've gone away, it's not that we're not going to perform on them. It's just the timing of that. And then the other thing that we mentioned that we did have a few performance issues on some of the chambers that we were completing. And those were primarily in the U.S. So those are the ones that I feel a lot worse about than I do the ones that got delayed because we can't control that. And there's no excuse when we have projects in-house not to perform on them. So those are the things that we're working hard to make sure that they don't repeat themselves.

That's helpful, Vic. And then if I can actually go back and revisit some of your comments on USG. The business certainly came in well below where I was thinking. The water scenario really sounds like 2 underlying scenarios in that actual shipments were pushed as well as the orders, which would not have necessarily materialized in the quarter anyway. And I got a better understanding from your comments earlier that the orders, then we should see that as rez in '13. But I wasn't clear on what really happened with the shipments that we were expecting within the quarter and where those have moved?

Yes. And it's not -- just to be clear, it's not an inability to ship product. That was not our problem. We typically, with those -- particularly the smaller water projects, which are the ones that we thought were going to happen that didn't, those typically are book and ship. So we can book and ship those in a very short period of time. We keep inventory available to satisfy those. And so it was a matter of we thought things we're going to happen, the first part of the quarter we would be able to ship those. And they did happen. And so it's not a matter of inability to ship, that's never been a problem for us. It's really that the book and ship orders that we thought were going to happen, but didn't happen.

Okay. That's helpful. And then just one last question. The efforts around the cost structure, any specific focus around the different businesses? Obviously, I think, that Test is on the table there. More clarity and I'll jump back on the queue.

Yes. And just to be clear, I mean, I don't want to overplay this because I think those of you who have followed us know this is something we do on an ongoing basis. And so we're not coming in and talking about we're going to do a big restructure of the business or anything like that. It's just that I want to make sure that people understand that -- we understand we've got a few issues, we're going to address those like we always do. I just felt compelled to say something specific about this so you knew that our attention was clearly focused on that. So what we're really doing is looking at the Test business for one, certainly, because we want to make sure that we're making products at the right places to be most cost-effective, because it's a very complex business. We have a lot of locations and products get shipped from location to location, just because that's the way the business is set up. So we want to make sure that we're doing that properly, that we're making it easy for those guys as we can to be successful. And then we'll look at other places around the business where -- and we don't have any significant areas where we've got big issues other than that. But certainly, it warrants us going back and looking because we are committed for this big -- significant growth next year. Obviously, most of that is going to come through growth or the organic growth of the business. We're also going to make sure we've got the right cost structure in place to give us some protection for that.

Our next question comes from Craig Irwin from Wedbush Securities.

So in the filings related to SoCal, they've disclosed -- and actually, I think at a project meeting, they also disclosed that they already ordered about 100,000 units from you. Can you discuss whether or not any of those units were delivered in the June quarter? Or if this is part of the contribution to sequential growth at USG in the fourth quarter?

Yes. We really haven't -- haven't delivered -- I mean, other than qualification units, we've not delivered a mass delivery yet. So that is yet to come. So that 100,000 they've ordered as well as the 355,000 that they've ordered have yet to be delivered. So we're in the ramp-up phase with our subcontract manufacturers and those deliveries will start, I believe, at the end of the first quarter of '13.

Okay. So then they had said previously that they were going to do 10,000 units in your first fiscal quarter. Given that they themselves announced a 101,000 unit order, can we just infer that, that will have multiple delivery dates as far as the original order? Or would you be more likely to deliver that at one point in time?

No. I mean, the way that happens, I mean, it's a pretty complex supply chain, if you will. So we'll be delivering product on a weekly basis once we get ramped up. So certainly, they'll have the 10,000 that they're going to put in the field and in our fiscal first quarter to kind of test out the system. And then once we start ramping up, we'll be making weekly deliveries to the customer.

And Craig, just to help you reconcile it, when they put out their technical filing, they had ordered about 100,000. But through June 30, they purchased another 250,000. So they're up to 355,000 modules that they have under firm commitments through today. And so I think as Vic said, the 10,000 will go in the fourth calendar quarter of this year. And then they're on track for January 1 launch at a high rate of installation. And so I think that 100,000 that's in the technical filing needs to be -- that's probably 2 months old of data and then the last couple of months, as I said, they ordered another 250,000 to bring the total to 355,000.

Great. And then, Gary, just looking at the fourth fiscal quarter, can you help us understand the sequential revenue progression in the 3 different segments? It's pretty clear that Tests, some of the things were pushed and there's good potential for that to help the fourth quarter. But can you maybe discuss USG and Filtration in a little bit more detail?

Yes. I think on Filtration you're going to see another incremental step up from Q3. We did roughly 50-ish there in Q3. And I think you'll see another additional nominal step up there. And Test, if you remember on the last call or in the last couple of calls, I said this year is going to be kind of bouncing around. In the first quarter we did $40 million, on the second quarter we did $50 million, in the third quarter we did $40 million, and in the fourth quarter we're going to do $50 million, again. And that really comes down to the size of some of the -- the individual size of some these big international contracts that are on track that we're past critical milestones. As Vic said, on the ones that get pushed out, and not using this as an excuse, but when the parent building that our work is going inside of is not done, that is a critical milestone that determines when you launch. So the ones that are going to be completed here in Q4 are well past initial installation and they're on track. So we should be up to about $50 million again in the Test business. Coming back to Doble, they should be sequentially higher than where we were in Q3. And what that relates to is, as Vic said, there are several new projects that came out, the Arms initiative, which you saw a press release issued by one of our customers, S&C Electric, a week or 2 ago. And then there's some other software releases that are incrementally positive that fall into the new bucket as well. So if you put that up at $27 million, $28 million off of the $25 million, I think you'd be fair there. And then the other side of it is, in the fourth quarter as we always do at Aclara, this is the largest COOP delivery quarter that we have every year. So when you look at what we delivered in Q3 at Aclara, which is about $52 million or so, that should step up about $70 million. And you say, well that's a big step up and you have this water softness, we've tempered that back. And where we really see the significant sales is coming out of the COOPs from a combination of things,direct sales as well as distributor restocking through the HD Supply network, where they ramp-up their inventory for installations that they have scheduled beyond when we ship to them. So we're extremely confident on the COOP side. We think we've dialed back the same level of softness on the water. So if you put the Aclara business in the aggregate in the low-70s on revenue, I think you'll be okay there.

Our next question comes from John Quealy from Cannacord.

On the SG&A or cost of sales side, I know through the quarters this year we talked about technology enhancements on the AMI system for SoCal. I think the expectation was those would wind down this year. Can you comment, have they wound down? How much were they? And how much can we potentially save moving into '13 on that type of development work?

Well, I think they have already started a ramp down. If you look at what we've been spending for our new product development, it's probably somewhere in the neighborhood of over $5 million this year, just on new product development for SoCal. We think that the majority of that spending is going to be done this year. Again, at the same time, we're having to ramp-up the SG&A support on-site for SoCal, but it's not going to be that same level.

Okay. And then also on the water side, I know you guys launched, it might have even been post quarter a product update on 2-way on, I think, it was the old hex architecture. Did that factor into any of the water delays where customers were looking for revamped product or is it just mutually exclusive?

I'd say its really mutually exclusive. I don't think that really had an impact on that. It was really just people not making decisions in a timely manner. So that was -- I'd like to lay on something like that, but it's not...

That's fine. And then my last question is just math. So $30 million SoCalGas and USG bookings, so that gives you a sort of strip number of $59 million. Is that right, excluding SoCal bookings in the quarter for USG?

Yes.

Okay. So book-to-bill about 0.8 and the differential here is water push outs, is that right?

That's correct.

[Operator Instructions] Our next question comes from Richard Eastman from Robert W Baird.

Just a couple of things. Was there any revenue in the quarter to SoCalGas?

Yes. It was about $2.5 million to $3 million.

Okay. And is that -- why -- again, the thought process was that we might book $6 million to $7 million in the quarter. Was that a delay on their end that had to do with a collector issue?

Yes. That's part of it. Because we're still building out the infrastructure. And so as SoCal is going out, we've done the propagation map several times for them. And as they identify the sites where they're going to put these antennas, in some cases, they have to reassign those sites either because there's a technical issue or there's a site issue, meaning they couldn't lease the side a of building or there wasn't a pole to attach it to in the right spot. So that does cause some delay on their end, which obviously, makes the revenue side of it a little bit slower. But the way they're ramping up expectations for the metering endpoints, I don't think that's going to influence. When they start taking delivery on the metering endpoints, but I'd say on the network architecture, meaning the collectors or the antennas, they're a little bit behind schedule there.

Is the fourth quarter may be a similar number, $2 million to $3 million?

No. It should be considerably higher than that. I think they've addressed the majority of the site issues they're looking at, and they have workarounds on the locations where they couldn't lease appropriate space on buildings. So I think they have their end of it resolved in that fashion. So we should be on track by the end of the year relative to SoCal.

Okay. And then Gary, what was the other gain in the quarter?

It's a piece of the extensible earn out relative to the new accounting rules on how you handle earn outs relative to expectations. And so when we bought the company, there's an expected liability of what we'll pay them in the earn out structure. And as time passes, you have to adjust that relative to future expectations. So it was about $3.5 million of a noncash gain that basically just comes through from the accounting adjustment relative to purchase accounting. We had the same thing last year because you kind of -- you have to look at it every quarter and then at the end of our third quarter each year, we take a reevaluation of that relative to expectations. So if you looked last year in the third quarter we had, I believe, it was $1.5 million of the same type of adjustment. So there's only a little bit of that left, so you're not going to see that come through again. I think there's only $400,000 or so of the remaining liability that either stabilizes or goes away in the fourth quarter, but it's not expected to be material with what's remaining.

Okay. And then also, just -- Vic, did you guys sell a Test business in Germany in the quarter?

No. What that relates to, Rick, is what we're doing -- as part of the consolidation of costs, we have a Test business over there that's the EMV business. And then we have a Doble business over there. And so what we did during the quarter, and again, this is part of kind of merging the whole international structures. We basically set it up under a single legal entity. And the reason for that is from a cash management perspective as we move money around the world and from a tax perspective on an international basis, it was a very complicated structure to maintain 2 separate legal entities within the German structure. So what we did is we merged them legally. And again, it was done to eliminate some costs because we had duplicate overheads, but it mainly was done to facilitate cash management because it would be really odd if EMV had positive cash and Doble Germany needed cash. In the old structure, we had to bring it over from the United States and invest it there and it was just really complicated even though they're only miles apart. So what happens when you merge the entities legally, an internal document was created in the German governmental structure that basically said EMV went away. Then several folks called me subsequent to that and there was a German notification that the official name of the German entity, which is beyond my ability to speak German, it published that the EMV entity no longer existed. And what it was related to is, technically, it doesn't exist as a standalone entity because of the legal structures now merged into a common entity. So we did not sell the company, it's a complicated answer. But I'd say the best way to think about it is administratively, we rolled them into a single legal entity to better manage international cash and better manage international tax.

Taxes, okay, great. Just a last question. Vic, I've just got a question and may be you can explain this a little bit better, but we -- our previous guidance had a midpoint for this year of $2.10 in EPS. Now we're talking about maybe about $1.95, plus or minus $0.05. So when you reiterate fiscal '13 EPS guidance of being up 25% or so, off of that smaller base, we're talking about, basically, and I know this isn't guidance, this is your thoughts, but we're losing $8 million of pretax out of '13. We're talking about percentages off a lower base here. And so with a very strong backlog and good bookings, why are -- where is the weakness or why don't we still have the prospects of having the same year next year? Where is the leakage in revenue and profitability from your vantage point?

Well, I'm glad you asked the question because I was afraid that wouldn't be clear enough. I mean, our view, and again it's not guidance, but our view is that the increase that we're looking at next year was really based on our original directional guidance and not where we're going to end the year. So we're not saying it's going to be 25% over where we end this year. We're really looking for significant growth over where we had projected 2012 and up.

Okay. All right. So I mean, mathematically then, it should certainly be up more like 40% year-over-year?

Yes, mathematically.

I don't have my calculator in front of me. But yes, we're talking about -- we're not retreating and saying it's 25% over where we'll end up this year, it's really going to be the growth. We really still anticipate 2013 to be where we thought it was going to be 3 or 4 months ago.

From a dollar perspective. And we were trying to be a little cautious there, Rick, so we didn't just put out a number because we're not at that point yet. But I think the simplest way to think about it is, of course, we can say that the percentage has gone up significantly because the numerators dropped, and that's not really a fair thing to say. I think the best way to think of '13 is the dollars of revenue and the dollars of pretax and the resulting EPS that we had communicated throughout this year are still very similar to where they've been for the last 9 months. You could say some of these things have slipped from this year into next year should provide you with an upside, but the best way to think of those is that provides you with a nice amount of protection for the downside of what we don't know in the back half of '13. So if we were to pick a point of estimate, which we will do in November, I'd say the dollar amount today is consistent with the dollar amount 3, 6 and 9 months ago. So I don't want to get caught up in percentages. We had this written a little awkwardly because we didn't want to say sales --or EPS is going to increase 40%, so I think we're on the same spot.

Yes. And I guess the other one comment I'll make, and I think it's important that we make it is, this whole industry, I think, everybody knows is slipping around a little bit. And I think a lot of folks are saying, hey, we're not going to see growth until 2014 or beyond. And the one thing I'm excited about our perspectives is we've got the capability and the opportunities to do that next year. So it's not a matter of waiting 18 months for something good to happen. We've got the backlog to make it happen next year.

Our next question comes from Ben Schuman from Pacific Crest Securities.

Great. I think most of my questions have been asked, but can you maybe comment on the Europe softness, just how much of that was related to the personnel changes in Germany and how much was kind of macro-driven? And maybe a little bit more in terms of specifics about who you lost in Germany, just what their role was?

As far as just a personal issue, specifically and that was really related to our Test business and we had turnover at the top of that business. We were able to bring in a very senior person from Siemens to take care of that. And beyond that, it was a number of people more on the service side of the business that left and basically started their own business. And so that set us back a little bit. We've got that, I think better organized now. We've got, as I mentioned, a very strong individual to run that business, so I think we'll be okay there. The softness really was more related to across-the-board and at Doble in particular, it was softer than what we anticipated. The Test business across Europe, not just in Germany, but really across Europe was a lot softer than anticipated. So those are the 2 countries I'd say that had the biggest impact. Fortunately, Asia is going better than we had anticipated, but we need that to keep happening because, honestly, I'm glad that we have the smaller amount of exposure to Europe that we do. In fact, if you look company-wide, I'd say it's around 12% of our business is dependent on Europe. And so that's not, obviously, the same impact if we were hoping that we were going to be getting a tremendous amount of growth in Europe. So it's really a matter of kind of keeping that in check and not having too much more slippage there.

Okay. Great. Yes, I agree, less Europe is better these days. Then maybe an update on Brazil. My understanding is that there's been some movement there in terms of determining standards for AMI. Maybe we can finally see some movement there soon. What are you guys thinking about that market?

I'd say that, that's still being defined. I mean we have done some trials down there. Our view is that it's still going to take sometime for people to really get serious about that. We've got a good partner down there that is monitoring that for us. We have some people down there as well. We really have an opportunity, I think, to participate there as more and some of the rural and suburban areas rather than the European areas. I think there's some likelihood that those won't happen as quickly as some of the denser populated areas. But that's yet to be determined. Fortunately, we don't have any projections in the next couple of years that the debt is going to move forward. We see some of the other international opportunities that we see where we have are very well positioned and I think have an opportunity to move forward a little bit faster.

Okay. And then along those lines with Japan, Itron, I think said that it is expecting a tender in April and maybe shipments in 2014. Is that in line with how you guys see the opportunity in Japan?

Yes. I think things have been pretty consistent. I think TEPCO has finally, been a little more public about what their plans are, going more to the international standards, which I think is good for U.S.-based companies. But they will probably do something in that time frame, if not before. But once products gets on the underground they're probably going to test it for years. So I would agree with what they said as far as the timing of at least significant deliveries into Japan.

We have no further questions at this time. I will now turn the call over to Vic Richey for closing remarks.

Okay. Well, again, I appreciate everybody's interest. I think that we've got a good opportunity going forward. We're going to see significant growth in 2013 for the reasons that I outlined earlier in the call. And again, we're excited by the fact that we're going to be able to do that in the near term. We have the backlog and we have the opportunities in place to make that happen in 2013. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.