Good day and welcome to the ITT Corporation First Quarter 2008 Earnings Conference Call. At this time, all lines have been placed in a listen-only mode. After the speakers' remarks, there will be a question-and-answer period. [Operator Instructions]. We ask that you please limit yourself to one question and a follow-up. Thank you. It is now my pleasure to turn the call over to Tom Scalera, Director of Investor Relations for ITT. Please go ahead.

Good morning, everyone, and thank you for joining us to discuss ITT's first quarter 2008 results. With me this morning are Chairman and CEO, Steve Loranger and Chief Financial Officer, Denise Ramos. Steve will start today's call with some highlights from the first quarter, Denise will then walk through a detailed business review that includes each segment's Q1 performance and the 2008 earnings outlook. Steve will then wrap up with an overview of some strategic developments and recent awards at our Defense segment. Today's call will then end with a Q&A session. I'd like to highlight that this morning's presentation, press release and all non-GAAP financial measures provided during the call can be found on our website at itt.com/ir. In addition, let me remind you that any remarks that we may make about future expectations, plans and prospects, constitute forward-looking statements for the purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in ITT's report on Form 10-K as well as any other public SEC filings. This conference is being webcast and a replay will be available later today on our website. With that intro, let me turn things over to Steve.

Thank you, Tom, and I will take this opportunity to formally welcome you to lead our IR efforts following Peter Milligan's terrific promotion to our Electronic Systems business as a CFO, we were thrilled to invite Tom to replace him. And for those of you who don't know Tom, he did a marvelous job in the last several years leading our financial planning and analysis efforts. So welcome Tom, great to have you here.

Thanks Steve.

Good morning to all of you and thanks for joining us for this very exciting earnings release at ITT. This morning, we're pleased report yet another record quarter. In the first quarter of 2008, our leadership teams delivered solid performance across our balanced portfolio of end markets and geographies. And in addition, our teams worked diligently to address current market conditions while remaining focused on the long-term strategic health of our businesses. It's all of our team’s hard work that gives us the confidence to deliver an $0.18 increase from the midpoint of our previous full-year EPS guidance. This raise not only reflects very strong Q1 performances that exceeded our expectations but also our continued confidence in a solid outlook for the balance of the year. On top of a total revenue growth of 36% in the quarter, we delivered organic revenue growth of 9%, operating income growth of 30%, earnings per share growth of 25%, and record Q1 free cash flow of $185 million. Entering 2008, we believe that our leading positions in attractive growth markets and our high level of end market and geographic diversification would provide a solid foundation for 2008. And so far, we are off to a great start. During our presentation today, you're going to notice that we are going to highlight several strategic activities taking place at ITT. We think that our strategic focus at ITT has never been sharper than it is today and our recent strategic investments in key markets are already delivering exciting results. Just some examples. We are delivering radios to the Iraqi Military, we are breaking ground on a Fluid facility in Saudi Arabia, we are making acquisitions in dewatering at Fluid, we are breaking ground in the Czech Republic on a new Friction facility, and we are…

Thanks, Steve. So starting on slide two, the first quarter demonstrated very strong performances in every one of the categories presented. Our dedicated teams delivered record Q1 results in revenue, operating income, EPS, and free cash flow. Consolidated revenue grew 36% in the first quarter, with 9% organic growth, powered by double-digit growth at Defense and mid-single-digit growth at our commercial businesses that included 11% International growth. Segment operating income increased 30% due to base business performance and the incremental benefit from the EDO and IMC acquisitions. Segment operating margin exceeded our internal projections due to higher net cost productivity and compared to the first quarter last year, margins decreased 50 basis points. However, when you adjust for the 120 basis points negative impact from acquisitions and foreign exchange and favorable productivity and pension generate a 70 basis point improvement in our base businesses. First quarter adjusted EPS of $0.91 improved 25% compared to the prior year and was $0.10 higher than the midpoint of our previous guidance range due to stronger operating performance. In addition, we are thrilled with our strong Q1 free cash flow of $185 million. This does represent our strongest Q1 performance ever. With the strong Q1 cash flow, we will be in a position to pay down debt and resume our discretionary share repurchase program. We indicated at the end of 2007, we had delayed our share repurchase activities through Q1 while we financed the EDO and IMC acquisitions. Turning to Fluid Technology on slide three, in the first quarter, Fluid revenues grew 12% in total and 6% on an organic basis. International sales growth was 11% and it was driven by strength in Europe, South America, China, and the Middle East and that more than offset flat North American performances. The first quarter growth…

Thanks, Denise. I want to take this opportunity to remind us that our Defense strategy has been to reposition Defense to a future changing world, to continue to play in more essential and vital areas as we face the future. We are driving to build on our installed base. We're working to open up some adjacencies, we're working to white space between our value centers, the international markets, and we are advancing new technologies. In essence, our Defense strategy is most purposefully responsive to the concerns about budget pressures we may see in the next decade. It's the execution of this strategy that enables us to have an enduring and substantial economic contribution to our portfolio. So on slide seven, let me walk through some of the exciting 2008 strategic developments at our Defense business that gives us continued confidence in our long-term 8% to 10% growth rate projection. Our Communication Systems business has identified an international pipeline totaling $4 billion in future opportunities. Our international pursuits include Iraq, Bulgaria, Spain, and many others and keep in mind that these are incremental opportunities. We are already delivering internationally. In the quarter, our Communication Systems teams continued to ship radios including some new hand-held units to the Iraqi military and we see an overall ITT incremental opportunity here that could reach the billion-dollar level over time. During the quarter, we were also busy pursuing a significant multi-year radio opportunity in Bulgaria. On the domestic front, our Communication Systems team is in active negotiations with the JTRS team to position its technology and large installed SINCGARS base for increased future participation. These negotiations are progressing very nicely and we are anticipating some positive news in the near future. At Night Vision, we see demand building for our products. During the first quarter,…

Thanks, Steve. Jackie, I think we are ready to start taking the questions now. Question and Answer

Thank you. [Operator Instructions]. Your first question is from John Inch with Merrill Lynch. Please go ahead.

Thank you, good morning.

Good morning.

Book to bill in Defense, let's start with that, I guess it was below one, it's been below one before, I mean should we be at all concerned about that number or is it more the backlog, the $5 billion, to focus on?

No, we shouldn't be concerned about that number. It's going to float around plus or minus timing, as you know. The Defense business is comprised of large program orders on a non-regular basis. The number, John, to look at is our backlog and the other way for you to think about it, John, and certainly this is a very complicated process but we do look at the fund... not only the funded backlog but the awarded programs that are not yet authorized, we look at the pipeline and our win rates and when we factor all those components is where we actually get our overall long-term revenue forecast, which supports the 8% to 10%. So the best thing to look at is the backlog.

Okay. Steve, can I just ask you about Night Vision. I think a lot of people are under the perception that Goodrich actually has the next-generation Night Vision goggle. I was just looking at the press release, I think on January 3rd, they were awarded some sort of development contract for sensor technology. Do you perhaps clarify that because I think what is the difference between what they're doing versus sort of what you're doing in your Night Vision programs?

Yes. The way to think about it, first of all, Goodrich was awarded a development contract, but so was ITT. These are advanced technology awards and it is a typical process in the government to award two, sometimes three and four suppliers, long-range technology developments. So we are both advancing our new technologies on behalf of these programs. In our case, we're looking at integrating short-wave infrared and long-wave infrared with our image intensification. And I'll point out that we are already in production of the first generation of the enhanced Night Vision with the image intensification coupled with the thermal infrared. So we are already in production on first generation. So we feel good about our capability to advance in the future. We also have a very lightweight low power requirement power solution that we feel is going to bring innovation into this next technology. So both of us are advancing technology on behalf of the US Army and we will continue to do our best.

And then... thank you for that. And then just lastly, on Fluid, it looks like you lowered your margin guidance. Denise, was that all currency given the production footprint in Europe or was it also a function of US municipal being a little bit weaker?

What we did, John, is we adjusted for a currency, which was about 30 basis points. We actually raised their margin guidance about 10 basis points if you excluded the FX impact.

Okay. And why was that, the 10 basis point raise?

Well, the reason is because Fluid Technology is performing well. And as you know, in the couple of years, we've done a lot of value center integrations, we've been advancing our footprint globally. We've been integrating our sales capability, we've been investing in new products and quite frankly, that strategy is working. And Gretchen and her team have been doing a very nice job of bringing the new growth and the new productivity to the bottom line. Additionally, I would like to complement Tom Wikard [ph] and his team who as you know has been up and running with our global strategic sourcing efforts. And despite strong pressure on material cost escalation, overall, we are getting some nice benefits out of our global sourcing activities. So it's all come into the bottom line and we are proud of the progress that Fluid Technology is making.

Great. Thanks very much.

Thank you. Your next question is from Shannon O'Callaghan with Lehman Brothers. Please go ahead.

Good morning.

Hi, Shannon.

Good morning. Shannon O'Callaghan – Lehman Brothers: Great quarter. Hey, on the demonstration that you can take crew to 1,000 a month, can you clarify in terms of you demonstrating that versus what you are actually sort of planning on doing in your guidance? The last thing you said was 7,000 to 8,000 units for the year. Obviously if you start doing 1,000 a month, that's more than that, what's the updated view?

Yes, we have demonstrated our supply chain and engineering capability to meet the customer requirements, which flexes through a production rate of 600 at the low and 1,200 at the high throughout the year. The customer production requirements go up and down and we are in a position to flex accordingly. So it's a valid demonstrated capability. Now the way to think about it is that the total… the total production rate is roughly 7,700 for 2008. So to your point, Shannon, you are not going to see a 1,000 a month every month. What you will see is, as Denise already mentioned, is you will see some higher production in Q2 and some slightly lower production in Q3 and Q4, which is precisely according to the customers' request.

Okay. Great. Thanks. On the JTRS negotiations, obviously you’re in them, so you can't say a lot. But I mean, can you give any sense of… assuming those go well, what do you expect to sort of come out of that in the near term in a little more detail?

Well, we can't actually comment on. So I appreciate that point. But let me go back and remind us on a four-year journey that our customer and all of us in the industry have been on with JTRS. We have articulated a next-generation communication system and the complexity of executing that has to do with translating our installed base capability through interoperability to the JTRS requirements and of course, dealing with the extraordinary cost of new technology. So that has actually created an evolving series of requirements that the program office has been working on for the last couple of years to see where they can take advantage of existing technology. We believe that we've done our share in terms of advancing broadband and additional UHF capability with our SideHat coupled with interoperability capability with our Soldier radio wave form. And so without going into any more detail, I think I could just close by saying that the components that we've already talked to you about look like we're going to be in a position to get JTRS compliance capability with them, which would say that the building off of our installed base is something that we feel good about. So I will just leave it like that, but that's about as much as I can say and we think that overall the US government is working this in the proper fashion.

Okay. And just last one from me is, the international order pipeline, obviously pretty substantial and now it's actually looking with the activity in Iraq, being the communications provider there and with Bulgaria, I mean, how real is this in terms of where you are thinking maybe six to 12 months ago versus now in terms of actually realizing some of this international pipeline?

Yes. Well, certainly it varies on funding capability by government entity. In the case of the Iraqi Military, it's very real. We are shipping radios, we are getting paid and we expect to follow on. In the case of Bulgaria, we are still working with the government with respect to funding and so in that sense, we are not really sure. But overall, we expect the international military sales to be strong. As we mentioned that we think that we are going to see 15% of our Defense portfolio shipping internationally over the next couple of years. And while the timing is difficult to produce, all the signs are positive.

Okay, great. Thanks a lot.

Thank you. Your next question is from Deane Dray with Goldman Sachs. Please go ahead.

Thank you. Good morning, everyone.

Hi, Deane.

When I look at cash flow and the strength there and the organic revenue growth at 9%, all suggesting very good quality of earnings. So I hate to immediately focus on something as mundane as interest expense. But if I look at the guidance, Denise, that you have given for the '08 boost, half of that looks like it's coming from interest expense. So could you just walk us through what has changed regarding the outlook on terming out your bank loan and expectations for the interest expense on the balance of the year?

Sure. Our interest expense is… for the full year, $0.09 of that $0.18 is related to the interest expense. And the reason for that is, we’ve put into place our financing for the EDO and IMC acquisitions and we are heavily weighted towards commercial paper. And so when the interest rates had fallen from a commercial paper perspective, that's what you're seeing rolled through for the balance of the year. So it's really, most of it related to just a reduction in the rates that we are now seeing in 2008 versus what we thought we might be seeing when we first put out guidance at the end of 2007. Because at that time, we were still in the credit market situation where we were having much higher interest rates. So that's really what that's reflecting.

Just the whole delay in the process of terming that out actually worked in your favor. But what are the expectations about terming out that debt?

We put into place a new commercial paper facility that was about $1 billion, we completed that at the end of March, that's our current funding mechanism for it. As we get back towards later into the year, we will be looking at, do we continue with that program or do we take some of that and issue some longer-term debt. But… so we still have decisions to make on that and we plan on doing that in the latter half of the year.

Terrific. And then just on another topic, and I apologize again it's more mundane, but you're one of the few multi-industry companies that talk about FX as a headwind and I know that's because of your footprint… manufacturing footprint today. How do you expect that to change over the next year or so and in terms of shifting more of your manufacturing into low-cost regions?

We continue to look at that on just a very regular basis. And as you know, in the past couple of years, we have made a lot of changes and we'll continue to make changes and we'll continue to evaluate that. So part of it is going into low-cost countries. You also look at the business model and you find out where your customers are and where you should locate these facilitate. So we'll continue to do that on a regular basis, but for right now, we expect to continue to see this primarily in the Fluid business, not in the MoFlow business because MoFlow just has a slightly different footprint than Fluid does. So it's really only a headwind when you look at it from a margin perspective. So Steve, do you have any comments?

No, the only comment I would make on that, Deane, is that our primary strategy around our sourcing in Engineering and Production is going to be a strategically focused, market-based, customer-focused strategy. The impact of foreign exchange, and I’ll also throw in trade policy and I’ll throw in tax structure, has right now not been substantial enough to overwhelm our strategic positioning. So again we're going to try to drive for the right strategy first.

Terrific. Thank you.

Thank you. Your next question is from Michael Schneider with Robert W. Baird. Please go ahead. Michael Schneider - Robert W. Baird & Co., Inc.: Thank you and good morning. Wondering if you could address the Water and Wastewater commentary. Denise, a couple of times you mentioned delays impacting different forms in the quarter in the guidance. What have you seen and to the extent you can discern is it due to lower tax receipts, is it due to commodities inflation impacting budgets, etcetera?

Yes, hi, Michael. It's difficult to tell right now. We are seeing, in the United States, project delays in the municipalities. But what's quite… but what's directly underneath that is really uncertain, quite frankly we are just thinking that municipalities may simply be just holding back, hunkering down a bit in anticipation of some future concerns. It's not our understanding that tax receipts have actually trickled down through the economic situation that we have at this point. On the positive side, however, keep in mind that about 85% of the revenue which is associated with Water and Wastewater inside of the municipal budgets comes from tariffs or said better, people paying their water bills. So that is not expected to change materially. So we do think that overall, that budget segment inside the municipalities is going to hold up, although we are seeing some delays in major project activity at this point. Michael Schneider - Robert W. Baird & Co., Inc.: Okay. And just switching to IMC quickly, could you give us a sense of what IMC actually is growing? I know it’s not part of your organic growth calculation, but I am curious if that business is still growing double digits? And also have you witnessed the impact of an industrial slowdown on the business yet either in a sequential or year-over-year basis?

From a year-over-year perspective, IMC is actually doing extremely well. In the first quarter, they are up 10% year-over-year. So we're still seeing good growth rates associated with those businesses. Michael Schneider - Robert W. Baird & Co., Inc.: Okay, and you have not necessarily witnessed the industrial slowdown hitting that business because it is still growing double-digits or is there something else occurring?

No. At this point in time, we really haven't seen anything yet. Michael Schneider - Robert W. Baird & Co., Inc.: Okay. Thank you, and congratulations.

Thank you, Michael.

Thank you. Your next question is from Jeff Sprague with Citigroup Investments. Please go ahead.

Thank you. Good morning.

Good morning.

Just a couple of things, first, I may have missed it, I got cut off the call when you were discussing organic orders, Denise, on Fluid. You had said EMEA was strong on process. Could you give us a little additional color on the regions there and by product on the order side in Fluid?

Well, when we look at order growth for Fluid, when you look at EMEA, what's really strong there is the mining and the oil and gas component of that. So that's what we're seeing as a real strength. When we look at, not from an order perspective but from a revenue perspective where we saw the 11% growth for the quarter, we actually saw Europe being up about 7%, Asia was about 3% and then you’ve got China up very strong, over 30% and then the other regions. So you have your emerging markets that tend to be experiencing those really high growth rates right now for us.

Right. But as far as orders, can you give us a sense of US order on the Water, Wastewater side, US industrial orders, any additional color there?

For the order growth rates, what you would be experiencing, what we would see in North America is we do have flat order growth rate roughly in North America, except for when you look at our IP business and we see our IP business having still very, very strong results from an order perspective, not only internationally, but also here in the US.

And how about AWT in the quarter?

AWT in the quarter, we are still challenged with AWT. We've had negative rates from them. But we're in the process of going through a lot of changes in that business right now. So we were down for AWT in the US, but from an international perspective, we were actually flat.

And then, Denise and Steve, I think a couple of times, there was conversation linking EDO to MoFlow and MoFlow to FAA. It sounds like there is some cross-pollination going on there. Maybe I got that wrong. But could you elaborate on kind of the docs that are being connected there?

Sure, Jeff. Within EDO as well as within Motion & Flow, we do serve a variety of technologies to the commercial Aerospace business and the Military Airplane business. In the area of connectors, we of course have a strong supply to Boeing, AirBus, and Lockheed Martin with respect to Military Aircraft. And we are now working with EDO with the connector technology on some of the traditional EDO components, including the CREW Jamming technology. But very much of what EDO produces is uses a lot of connectors. And so there is a wonderful internal synergy there that's going on. With respect to the overall Aerospace, we do have an Integrated System Structures business at EDO, an antenna business at EDO, and then our connectors Aerospace, our Aerospace fuel boost pumps as well as our… some motion and control actuation systems within IMC, they all essentially serving the same market. So we’ve been internally working to leverage some sales and marketing to the same customers. So that's what we are referring to. We are getting some nice new wins in various places and that's what you would hear coming out.

And then just finally from me. Is your look on a full year free cash flow changed or is it kind of just timing here in the first quarter?

No, our full-year look has no change. We still tend to target 100% of net income and that remain.

Is there any particular reason that it wouldn't go up with higher net income. So you're expecting dollars to go up but not the ratio?

Yes, that's correct.

Right. All right, thank you.

Thank you. Your next question is from Nicole Parent with Credit Suisse. Please go ahead.

Just a follow-up on Jeff's question with respect to core order growth. I'm wondering if you could give us a sense of how you see that spread working throughout the year particularly in the commercial businesses when you think about core order growth both at Fluid and Motion & Flow as core sales growth?

Yes, when we… for the rest of the year Nicole, when we look at order growth and you break it down between North America and International we still expect to see challenging conditions in North America on the residential side, a little bit impacted on the North American municipal side. Commercial is still strong for us. And so we expect that will continue strong, maybe not as strong as what we've seen in the first half of this year. From an international perspective, residential is a little bit lower, but commercial and international continued strong and then, International for municipal and industrial continued strong for us. And I would also like to comment that all of this is basically built into the guidance that we've given you for the back half of the year. We now then look at Motion & Flow, what we have seen in aerospace continued strong both in the US for us where we have seen the softness and we expect to continue to see the softness in US Marine and that would be in the US and then from an international perspective too. But again I think it's safe to say that we have built all of this into our forecast for the back half of the year.

Great and just one last one Denise in your comments you mentioned a little bit about contingency action. Could you give us a sense of restructuring activity in the quarter and I guess you did mention global footprint moment at fluid, could you just give us the sense of where you're continuing the restructure within the businesses?

Sure. For the first quarter Nicole the restructuring dollars totaled about $4 million for us and we expect to restructuring for the full-year baked into our guidance is still $45 million to $50 million. Now we do continue to evaluate that to decide if we want to pull some restructuring item into the year so that we can start receiving those benefits soon or rather than later. But for right now we're still focusing on $45 million to $50 million and as you know lot of that end up happening... happened in Q4 of '07 last year for us. In terms of the footprint changes that we have for fluid, we're still…. I’m trying to get our China facility up and running there. We are still working on the India facility that we have and then the Poland facility that we have for Fluid.

Great thank you.

Thank you Nicole.

Your next question is from Steve Tusa with JP Morgan. Pleased go ahead.

Hi, good morning.

Morning Steve.

Hi Steve.

It’s an easy start for Tom. Just a couple of questions, just trying to reconcile the guidance here. First of all I appreciate the margin reconciliation as well as the guidance reconciliation at the end, it’s good detail. When I'm looking at your OP increase from previous guidance, I think it’s roughly about $40 million and that equates to I think roughly, well $45 million equates to roughly $0.15. So that would be just above the line stuff doing the sales and margin increase. Yet you guys are saying here that it’s only I guess $0.08, am I missing something there or can you may be reconcile that for me?

I’m not sure what numbers you've got there, Steve, because the numbers that we have here from a guidance perspective flow around to that base business performance of $0.06, EDO up $0.02, and then pension offset by some corporate implications of $0.01. So, I'm not sure where you numbers are, we would be happy to reconcile that after this call with you.

But the OP, pre-OP increases about $45 million, right relative to where you were previously?

About $40 million.

Yes, okay.

About $40 million.

We'll take that offline. The other thing is, in Defense specifically you're raising your revenue target by $50 million and your profit target by about $25 million.

It’s about $20 million for Defense we are raising.

Okay. So, EDO at $0.02 is about $5 million, sorry to undo all these numbers I’m trying to reconcile this and it's $25 million in revenue. So, that means the rest of the businesses is on an incrementally positive basis falling through it a really high-margin there, can you may be explain what's going on there, maybe you guys are just being conservative in the beginning and these are just adjustments to that conservatism or is EDO a little bit more than that, just curious?

It really is the strength that we are seeing in the base business than what we have seen in Q1. The other thing that’s getting impacted in here is the additional pension benefit that we’ve rolled into the guidance.

Okay. Got you there. It wouldn’t impact sales but it would impact profit.

That’s correct.

Okay, great, that’s it. Thanks a lot.

Okay, you are welcome.

Thank you. You final question is from John Baliotti with FTN Midwest Securities. Please go ahead.

Good morning.

Good morning John.

Steve, I think, if I look at what we're hearing on the U.S. side, what you're seeing in the muni side, it doesn't seem to be that inconsistent, given that it seems to me municipal is kind of wait the last minute to do certain things. And I guess that's about what 3% of your overall sales. But I was wondering, if you look at the trend or the discussion that are going on internationally on the commercial side, the industrial side and wastewater that seems like the trends are... the mix is more positively biased for going-forward, is that the sense you are getting?

Generally, yes. I mean, first of all the muni and the muni markets again, I was speculating, we're still trying to find out what's really underneath it. It's about 3% to 5% of our sales, we had the whole thing up for the US. muni. On the international market, we feel pretty good about that, particularly in the longer cycle businesses we are seeing continued strength in industrial processes. We're seeing regional strength in the municipal markets and in some cases in the emerging markets on the commercial side. So overall while we are certainly watching and working very, very vigilantly in some of the short cycle market impacts we see mostly in the United States, our international outlook is actually quite strong. So on a balanced basis, we feel good. This is why we discuss a lot about our portfolio positioning when we talk about having the right kind of geographic balance and the right kind of service and product mix. Again, keep in mind that about 35% to 40% of our commercial business is after market. And that coupled with the fact that the bulk of what we produce is essential technology. And so that after market is really a quite robust revenue annuity for the business, which is operating as a nice hedge to the short cycle economic fluctuations. So our long-term outlook for the international is still strong.

And I would imagine that after-market has a nice margin mix relative to new products or projects.

It tends to be, yes, our after-market component tend to be slightly higher than new installation. So again when we talk about the investable platform in MoFlow, when we talk about the channel management on the water side, it is that kind of business model that we try to make sure is centered in our portfolio.

I was just curious on a related question, moving some manufacturing to certain other geographies in the world, is that... aside from the cost benefit of that, is that because of your local presence, is that some of these other orders you are seeing in other, let's say, less related divisions of ITT, are they benefiting from... is there a relationship improving in those geographies that's helping you like Eastern Europe or areas like that?

Without a doubt. When we place our capital footprints, we're looking at primarily access to indigenous markets, we're looking at access to technology and then certainly we are looking at global cost in terms of manufacturing. But in light of the fact that a lot of our products are quite frankly very, very heavy, the real reason, if you take a look at China, remember that 85% of what we make in China stays in China. And we all know about the Chinese growth and we all know that the local economies want to buy locally. So where we have strong market economies, we are positioning locally. We also have great access to technical folks as well, most notably in India and China. I mentioned we are starting... opening up a new service and like repair and light assembly facility about 60,000 square feet in Saudi Arabia. That is most definitely to serve the Middle East market. It just as much better to service there. So all in all, it's a balanced strategy. We obviously get low cost when we move to some of these regions, but we also get indigenous customer presence and technical capability as well.

Okay. That sounds great. Thanks, Steve.

Okay. Well, thank you John and we will thank all of you for your participation in this phone call. We are proud of our performance and we are going to turn our attention to execution for the balance of the year. So, thank you all and enjoy the spring.

Thank you. This concludes today's IIT Corporation first quarter 2008 earnings conference call. You may now disconnect and have a wonderful day.