Operator: 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.
After the speakers' opening remarks, there will be a question-and-answer period. 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.
Paul E. Goldberg - VP, IR: Thank you, Laurie. Good morning and welcome to Dover's second quarter earnings call. Today's call will begin with 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. As a courtesy, we kindly ask that you limit yourself to one question with a follow-up.
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 1st, and the audio portion of this call will be archived on our website for three months. The replay telephone number is 1-800-585-8367. When accessing the playback, you'll need to supply the following access code, 12556710.
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 statements. 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.
With that, I'd like to turn the call over to Bob.
Robert A. Livingston - President and CEO: 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 and 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 continue 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 end products and Identification, as several leading retailers continued 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 OEM product launches anticipated for the late third or early fourth quarter.
In our Energy segment, solid production activity especially within international markets and continuing strength in downstream and retail fueling are among the trends that drove solid results. We expect the rig count to improve sequentially through the remainder of the year and for our production and downstream markets to remain strong.
Within our Engineered Systems segment, refrigeration and food equipment markets were seasonally strong and our business performance was excellent. Regarding our fluids markets, our solid results were driven by a healthy mix of long and short-cycle product shipments with particular strength in our long-cycle pump business. Our industrial end markets were improved with solid results in our global auto related markets and strong performance in our environmental solutions group.
Within our Printing & Identification segment, growth in our fast-moving consumer goods markets was offset by a top barcode market and project timing. I am pleased with the recent momentum in this segment as evidenced by solid sequential revenue growth of 5% and an improving margin. Our acquisition program was quite active during the quarter as we built our pipeline and closed four small synergistic deals all of which either expand our product breadth or geographic reach. I am also pleased to report the spin-off of Knowles is progressing well and we are on track to complete it early next year.
In summary we are taking up the low end of our range based on our solid second quarter performance and our confidence in the second half.
With that, let me turn it over to Brad.
Brad M. Cerepak - SVP and CFO: 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 the $0.02 impact related to spin costs adjusted EPS was a $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 shipment of longer-cycle products in fluids, including a deferred shipment from last quarter.
Normal seasonal growth coupled with new smartphone releases helped drive 8% growth in Communication Technologies. Printing & Identification grew 5%, representing fast-moving consumer goods growth and barcode product shipments. Lastly, solid downstream activity and improved drilling revenue helped drive a 2% increase in Energy.
Sequentially, bookings were flat, although three of our four segments achieved growth. Communication Technologies bookings increased 11% sequentially on the strength of OEM product launches in the consumer electronics market. Printing & Identification showed growth as several deferred barcode projects began to book. In all, bookings in Printing & Identification grew 9%.
Engineered Systems grew 2%, principally driven by its refrigeration and food equipment markets. Energy declined 15% due to seasonality, unusually severe weather in Canada and large Queensland gas orders booked in the first quarter, which did not repeat the second quarter. The order activity related to this project has already resumed in the third quarter.
Now, on Slide 6, Communication Technologies posted revenue of $401 million, an increase of 11% from prior year. The strong growth in consumer electronics principally reflects the impact of new product releases in the smartphone market. All other end markets were largely flat, although, our telecom market has shown improvement over earlier quarters.
Earnings increased 3% to $52 million, while segment margin declined 100 basis points to 12.9%. This decrease largely reflects incremental restructuring cost of approximately $9 million. These costs include productivity and integration activities in our speaker and receiver business and facility rationalizations in our telecom businesses. Absent these charges, margins would have been 15%, an increase of 110 basis points.
The majority of our 2013 restructuring activities are now behind us. We expect to realize the benefits of these actions in the second half. Restructuring benefits coupled with the expected second half volume increases connected with new OEM product launches, will result in a go-forward segment margin that is significantly above our first half level.
We are pleased with the progress as we embark on these new product launches and we've successfully positioned our business as a true launch partner with our OEMs across all Acoustic products. Bookings were $422 million, up 9% from last year, reflecting normal seasonality and continuation of the Samsung ramp. Book-to-bill finished at a solid 1.05.
Turning to Slide 7, Energy revenue of $573 million increased 6% while earnings $133 million declined 1%. Energy produced another solid quarter as drilling production and downstream all achieved revenue growth despite unusually weak Canadian market. As expected, North American rig count declined on a year-over-year basis. Our continued focus on global, market expansion allowed us to post another solid quarter of international growth, which was up 37%.
Operating margin of 23.2% was down 170 basis points. This reflects product mix, product development costs and investment for international expansion. Bookings were $526 million, a 1% decrease from the prior year. Strong bookings growth in drilling and downstream was offset by production. Book-to-bill was 0.92, reflecting the timing of orders and shipments related to the previously mentioned Queensland project.
Now on Slide 8, Engineered Systems had an outstanding quarter where sales of $1 billion and earnings of $165 million were up 13% and 24% respectively. Our Fluid Solutions platform revenue increased 7% to $227 million, benefiting from strong results in our pump markets. In all, Fluid Solutions had organic growth of 4%.
In Refrigeration & Industrial, revenue grew 15% to $777 million, reflecting the Anthony acquisition and strong growth in the food equipment and environmental solutions markets. Organic revenue growth was also 4% in this platform. Excellent execution drove operating margin up 140 basis points to 16.5%, reflecting strong leverage on volume. Bookings were $998 million, an increase of 15% driven by recent acquisitions. Overall, book-to-bill was 0.99.
For our Fluid Solutions platform, bookings increased 5% to $213 million and Refrigeration & Industrial increased 18% to $785 million. Book-to-bill for Fluid Solutions was as expected at 0.94, reflecting large project-related pump orders shipped. Refrigeration & Industrials' book-to-bill was 1.01.
Now let's turn to Slide 9. Printing & Identification revenue was $251 million, essentially flat with the prior year. Earnings increased 24% to $36 million. Our fast moving consumer goods markets showed modest organic growth which helped to mitigate softness in our industrial markets, particularly in our bar coding business. Of note, European revenue increased after two quarters of decline.
Operating margin increased 280 basis points to 14.3%, the benefits of restructuring actions taken last year and the absence of those charges helped drive margin improvement. Bookings were $259 million, up 3%, reflecting growth in our fast-moving consumer goods markets. Book-to-bill ended at 1.03, up slightly from last year.
Now, on Slide 10. Second quarter net interest expense was up slightly from last year at $30 million. Corporate expense increased $2 million, principally reflecting incurred spin costs. Our second quarter tax rate was 7.3% and included discrete tax benefits of $0.36 related to the finalization of various domestic tax audits. Our normalized rate was 26.7% for the quarter and is 27.2% year-to-date.
Capital expenditures were $53 million. Lastly, we repurchased 758,000 shares for approximately $59 million in the quarter, all of which were repurchased under our $1 billion program. In total, we have repurchased $600 million and remain on pace to complete 70% to 80% of the program in 2013.
Turning to Slide 11, and our 2013 revenue guidance. Our revenue guidance remains unchanged from our last earnings call. We expect full year revenue growth of 7% to 9% with organic growth in the range of 3% to 5%. Completed acquisitions will add around 4%.
Now moving onto Slide 12, which shows our full year guidance; as Bob mentioned earlier, we are revising our full year EPS guidance to reflect our solid second quarter results, the tax benefits and incurred spin costs. We now expect full year EPS to be in the range of $5.56 to $5.71 as detailed on the reconciliation page of the presentation deck.
As a quick review we expect full year revenue growth of 7% to 9%, corporate expense remains unchanged at $150 million, interest expense will remain around $127 million, CapEx is now estimated to be about 3.1% of revenue. Our full year tax rate of 27% to 27.5% is slightly lower than the previous estimate due to mix of geographic earnings.
Turning to earnings bridge on Slide 13. 2012 adjusted EPS was $4.44. For the full year the impact of volume and mix is largely unchanged at $0.31 to $0.44. Net productivity should be a key contributor and add $0.20 to $0.25, up from our last estimate on the benefits of restructuring. We expect completed acquisitions to be $0.13 to $0.15 accretive for the year, largely driven by Anthony. Investments in compensation will have a $0.16 to $0.23 impact for the year due to higher investment in international growth.
Our ongoing share repurchase program, coupled with a slightly lower tax rate and offset in part by incremental interest expense should have net benefit of $0.33 to $0.35. As mentioned, incurred spin costs were $0.02, while discrete tax benefits provide $0.38 benefit. Based on the above, earnings per share from continuing operations, is expected to be $5.56 to $5.71.
With that, I'll turn the call back over to Bob for some final thoughts.
Robert A. Livingston - President and CEO: 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 am 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 spin-off of Knowles will create substantial shareholder value and strength in both companies. When completed, I believe Dover will be 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 technology 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' take some questions.
Paul E. Goldberg - VP, IR: Thanks Bob. At this time, I'd like to remind everybody to kindly limit yourself to one question with a follow-up so we can get everybody in.
With that, Laurie, if we can have our first question?
Operator: Shannon O'Callaghan, Nomura Securities.
Shannon O'Callaghan - Nomura Securities: Bob first on the consumer electronics performance here, so 27% in the first quarter, that was above the 15% to 20% you had 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 are planning for the second half given you outperformed in 2Q?
Robert A. Livingston - President and CEO: Okay, so you're asking two questions. One, the performance of the second quarter relative to the guidance we provided on the April call, and Shannon, 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. The 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 Technology space in the second half of the year.
Shannon O'Callaghan - Nomura Securities: Just quickly on Energy, I mean the international growth has been great but the margins were a little lower this quarter. I mean can you talk about your sort of expectations to (start to bring) rig count up a little bit but certainly maybe profitability expectations going through the rest of the year?
Robert A. Livingston - President and CEO: Second quarter margins down a little bit. My first comment would be to treat them – to 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 will 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.
Operator: Nigel Coe, Morgan Stanley.
Nigel Coe - Morgan Stanley: So just, the – obviously you referred to some of the factors that drove the bookings weakness in Energy Q-over-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?
Robert A. Livingston - President and CEO: 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 and Energy, most notably around production and Energy as being a little bit lumpy, and it's not a steady drumbeat. 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, Nigel, is, what is it, $70 million or $75 million, Brad?
Brad M. Cerepak - SVP and CFO: $75 million, so that one won't all ship in the third quarter.
Robert A. Livingston - President and CEO: As an example, that order is actually for product shipments in the late August through mid-first quarter timeframe of next year.
Nigel Coe - Morgan Stanley: So just to clarify that…
Robert A. Livingston - President and CEO: Don't pencil this in at the low end of that range.
Nigel Coe - Morgan Stanley: Okay, $70 million order came in early July, okay.
Robert A. Livingston - President and CEO: I think it was actually the first week of July, yes.
Nigel Coe - Morgan Stanley: Then switching to Comm Tech, you know you called out Samsung several times, and I don't think I have ever heard you, actually refer to an OEM customer on the call before. So, I'm wondering if that's the signal.
Robert A. Livingston - President and CEO: We're not going to refer to.
Nigel Coe - Morgan Stanley: But is that indicative that Samsung is…
Robert A. Livingston - President and CEO: Yeah.
Nigel Coe - Morgan Stanley: Is that now indicative that Samsung is now your biggest customer?
Robert A. Livingston - President and CEO: No, for the year they will not be. No. It's fairly – it's fairly – it's a fairly closed position between customer one and customer two 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 microphone business and it's growing for our speaker and receiver business.
Operator: Scott Davis, Barclays Capital.
Scott Davis - Barclays Capital: You were 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 are seeing strength in the quarter?
Robert A. Livingston - President and CEO: So Scott, let me preface before I give you response to the second quarter, let me preface this by saying, I have shared both at Dover Day as well as some of the conferences that we've been speaking at that over the last four or five years, we've actually served two key markets within China. One of them being the very, very significant (port) market for China, the export industry and that's – we're doing much less than 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. I would tell you as an opening statement, that's what you see in the second quarter and I think that's what you are 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 four 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 in our Printing & Identification segment. It was – well again I don't know how else to say, it was rather broad based.
Scott Davis - Barclays Capital: Just as a quick follow-up. I mean you did four 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 is looking (indiscernible)?
Robert A. Livingston - President and CEO: So multiples, first off I am 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. So they are rather small. The question around valuation and multiples maybe actually a bit lower than our historic number over the last four or five years and I think our historic number for the last four years has been $9 million or $9.3 million something like that in trailing EBITDA.
Brad M. Cerepak - SVP and CFO: Somewhere in that area, yes that's right.
Robert A. Livingston - President and CEO: 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 extensions. 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.
Operator: Jeff Sprague, Vertical Research.
Jeff Sprague - Vertical Research Partners: 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. It seems like you would have been able to actually do a lot more than you did.
Brad M. Cerepak - SVP and CFO: You are talking about the acquisitions, Jeff
Robert A. Livingston - President and CEO: No I think your question was, why was the share repurchase activity been in second quarter?
Jeff Sprague - Vertical Research Partners: Yeah. I'm kind of wondering if there's maybe a big deal that didn't happen and therefore, you didn't do share repurchase.
Brad M. Cerepak - SVP and CFO: No. 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 a little bit more aggressive in the second half than in the second quarter on that, Jeff.
Jeff Sprague - Vertical Research Partners: Can you give us a little color on Anthony organically if we think about that on a pro forma basis how it grew in the quarter?
Robert A. Livingston - President and CEO: Organic. No, I actually don't have that data on what they did the last year. We view Anthony is being very much on track with our acquisition model and the expectations we had for the year. Our closed 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 in the channel management. We're quite happy with the acquisition.
Brad M. Cerepak - SVP and CFO: 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% sequentially growth into Q2. We'll see that continue to grow into Q3, and then obviously moderate with the seasonality in that into Q4, but right on track where we expected to be both in terms of our revenue expectations and importantly our earnings expectations.
Jeff Sprague - Vertical Research Partners: Then just one last one on Samsung. So, if we think about your sales to 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, or are you still early in kind of an adoption curve with them on new products or increased content on existing products?
Robert A. Livingston - President and CEO: 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 over the first half.
Operator: Deane Dray, Citi.
Deane Dray - Citi: There was a discussion earlier on expectations for an increase in rig count, some of that's seasonal, can you quantify that and what the timing is and maybe the split between gas and oil?
Robert A. Livingston - President and CEO: I am not sure that the split between gas and oil has changed any over the last couple of quarters, Deane. I think 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 second half of the year I think we – our plans I think are calling for about 3% sequential improvement in North America rig count. Let me correct that, 3% sequential improvement in U.S. rig count second half over first half averages. So it's not a big driver of our expectations but we do see them improving slightly.
Deane Dray - Citi: Is that a seasonal adjustment would you say?
Robert A. Livingston - President and CEO: No I am not going to – you would see the seasonal adjustment in Canada and that one tends to be a bit more significant, Deane. 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.
Deane Dray - Citi: You've mentioned Canada and we've seen some of the impact discussion about the impact of flooding. How would you characterize that on your business and what kind of snapback recovery you expect then?
Robert A. Livingston - President and CEO: I don't have an exact dollar impact with respect to revenue, but the – look, it's pretty safe to make the statement that in the last, whatever it was, the eight or nine days of June, Southern Alberta, there wasn't much business activity going on. That flooding was pretty severe.
Deane Dray - Citi: How did that recover?
Robert A. Livingston - President and CEO: We do see a recovery. We do see a return to normal activity in the third quarter and fourth quarter.
Operator: Steve Tusa, JPMorgan.
Steve Tusa - JPMorgan: Just a question on the Comm Tech stuff. So I guess in the back half of the year to get to your guidance first to second half, you need about $120 million in sequential increase?
Robert A. Livingston - President and CEO: I think that sounds about right. I don't have that exact number. It may be slightly high, but it sounds about right.
Steve Tusa - JPMorgan: And so, if I assume the other business 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 to stable?
Robert A. Livingston - President and CEO: There will be some improvements in the non-acoustic businesses in the second half versus the first half. But the bulk of the sequential growth Steve is as you are inferring. It's going to come from consumer electronics.
Steve Tusa - JPMorgan: So. 50% of the business is, you know going to carry the – carry most of 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?
Robert A. Livingston - President and CEO: So, even aside from product launches that I'll comment on. Here is 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 its rather broad-based, and the increased revenue aside from the 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 and (late) third and fourth quarter.
Steve Tusa - JPMorgan: It's handset focused is still the – it's not like some new…
Robert A. Livingston - President and CEO: Almost all of it is handset focused.
Steve Tusa - JPMorgan: So the other bids outside of Samsung is growing a lot faster than Samsung. You got the Samsung stuff, it was really the lift in this quarter that you called out?
Robert A. Livingston - President and CEO: Correct.
Steve Tusa - JPMorgan: Just one quick one on Engineered, very good quarter, much stronger than I was expecting. I guess you mentioned the (Bevcan) stuff. I guess you called that out a bit in the 10-Q, but it's interesting that the core – seems like the core Hill PHOENIX business, what was that up because you were still kind of anniversarying 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 the organic at Hill PHOENIX that can kind of back into the rest?
Robert A. Livingston - President and CEO: I think organic at Hill PHOENIX was 4% or 5%.
Brad M. Cerepak - SVP and CFO: 5%.
Robert A. Livingston - President and CEO: 5%.
Steve Tusa - JPMorgan: That includes the Target headwinds that you expected?
Brad M. Cerepak - SVP and CFO: Well it was more in the first quarter than in the second, but there was a headwind there, yes.
Robert A. Livingston - President and CEO: We called this out on the April call. The real headwind we were feeling at Target was much more noticeable in their first quarter. We still dealt with it in the second quarter but it was reduced.
Operator: John Inch, Deutsche Bank.
John Inch - 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 was just curious about the trajectory of this?
Robert A. Livingston - President and CEO: Actually we would have probably been more helpful if I had mentioned the actual business instead. But there is more – 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 that we want it, but that's where we see the primary long-cycle activity is within Maag.
Brad M. Cerepak - SVP and CFO: That's where we had the deferred shipment from the first quarter.
Robert A. Livingston - President and CEO: Yes. 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.
John Inch - Deutsche Bank: 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 flow industry having been talking about projects being pushed to the right. I'm just wondering, if maybe you are starting to see some of these projects perhaps get kind of re-put back on the books here or something like that.
Robert A. Livingston - President and CEO: It wasn't just one vertical, but if I did mention one vertical that was important, it is the plastics vertical.
John Inch - Deutsche Bank: Lastly, about Knowles, I mean, Knowles really just doing so well. If you were to keep the business next year, I mean, our back of the envelope says that might contribute $0.80 plus 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?
Robert A. Livingston - President and CEO: Well, your comment was if we were to keep Knowles, let me repeat my previous comment. Our progress on seeing a first quarter spin 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 two three of fourth quarter. With respect to additional share repurchases, all I'm going to do is repeat the comment the comment that 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.
Brad M. Cerepak - SVP and CFO: 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.
John Inch - Deutsche Bank: 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 (sorting) out the portfolio.
Robert A. Livingston - President and CEO: We are running a process and I think as I have been saying for the last three months or four months, I think you will see us make an announcement here in the third quarter.
Operator: Julian Mitchell, Credit Suisse.
Julian Mitchell - Credit Suisse: 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 contact restructuring or is really just in Printing & ID or haw are thinking about that? I guess related to that point on Printing & ID, you had a very, very big margin jump in Q2 of 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?
Robert A. Livingston - President and CEO: But as I said in my comments, the increase in productivity is specifically due to the restructuring benefits. When we enter – 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. So the benefits we are seeing coming through in the second half had a lot to do with the amount we have spent in DCT to take out costs. You will see it in the margin expansion in the second where we said we would be substantially up. So that's what you are seeing on the bridge. Your other question Julian was around Printing & Identification. Yes. I think if you're trying to build your model and I know that's what you are 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 - Credit Suisse: Then just the follow-up would be around, U.S. kind of short cycle industrial demand. I think you had made one or two comments that did look better I think I guess stuff related to the automotive supply chain. Perhaps, could you elaborate a little bit?
Robert A. Livingston - President and CEO: Don't – we call it auto-related and it's not so much the auto supply chain for building vehicles and light trucks here in North America, but it's a really a comment around our lift business within Vehicle Service Group. The activity there remains 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. and 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.
Operator: Charlie Brady, BMO Capital Markets.
Charles Brady - 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's becoming a maybe a little bit better than what are currently in current budgets. You speak to that effect of what it's having on across the business segments?
Robert A. Livingston - President and CEO: 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 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.
Charles Brady - BMO Capital Markets: Then just in terms of the Energy segment, the impact of the Canadian, the softness I guess, 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?
Robert A. Livingston - President and CEO: Yes, it's correct.
Charles Brady - BMO Capital Markets: So, I guess, can you quantify kind of what the impact was in the Q2 and has anything shifted outside of '13 or is it just kind of moved to little bit to the right.
Robert A. Livingston - President and CEO: I'm not aware of anything that has shifted out of '13. It's all moved to the right.
Operator: Nathan Jones, Stifel Nicolaus.
Nathan Jones - Stifel Nicolaus: 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 have seen recently, and can you comment on which markets were better, which markets were worse, and if you see, you think you might have seen an inflection point there?
Robert A. Livingston - President and CEO: 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 business that – you were asking for a little bit of color on what was up and what was down, it is interesting. I think for the first time in – with three quarter, three or four quarter, Brad, Markem-Imaje was actually up in Europe in the second quarter. It was modest, but I think there were up maybe 3% or 4% -- 3% in Europe in the second quarter. Our pump business may have been up slightly but even when – it is interesting that even within our pump business you'll see some brands serving some verticals that were up and you will 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 5%, 6%, 7% down.
Nathan Jones - Stifel Nicolaus: 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 is progressing faster from either a cost out standpoint or a revenue synergy with Hill PHOENIX's standpoint than you had anticipated when you bought it?
Robert A. Livingston - President and CEO: So I would say that your question is could Anthony contribute to our margin performance, that's the question.
Nathan Jones - Stifel Nicolaus: Yes. Perhaps potentially more than you had expected it to?
Brad M. Cerepak - SVP and CFO: No. I would say it's right on track in 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 margins.
Robert A. Livingston - President and CEO: It's a drag on margins.
Brad M. Cerepak - SVP and CFO: It's a drag on margins, but if I took out that AD&A, we are really, really pleased with – I am not going to go and tell you what the margin is for Anthony but let's just say it's not an operational drag.
Nathan Jones - Stifel Nicolaus: If I could just get one clarification question, and Bob, you said that you expect Energy margins for the year to be 24%, is that right? Which would mean that down year-over-year in the second half?
Robert A. Livingston - President and CEO: 24% and a small fraction, I think, it would be a good number to look at.
Operator: Mick Dobre, Robert W. Baird.
Mircea Dobre - Robert W. Baird: 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?
Robert A. Livingston - President and CEO: 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 are 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 to share gain and don't label this as a stronger than anticipated North American market. It's our international activity.
Mircea Dobre - Robert W. Baird: I guess last one from 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.
Robert A. Livingston - President and CEO: Okay. So growth opportunities, I guess my first comment would be with respect to geographic opportunities and we still see plenty of opportunities for this business in emerging economies. I commented earlier that all four 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 questions 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 one or two or three 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: Are those opportunities still fairly small, or are you looking at something larger?
Robert A. Livingston - President and CEO: they are small, but perhaps larger than what we did in the second quarter.
Operator: Thank you. That concludes our question-and-answer period. I would now like to turn the call back over Mr. Goldberg for closing remarks.
Paul E. Goldberg - VP, IR: 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.
Operator: 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.