Feb 22, 2008
Executives
John Humphrey - VP and CFO Brian D. Jellison - Chairman, President and CEO
Analysts
Christopher Glynn - Oppenheimer & Co. Michael Schneider - Robert W.
Baird Jeffrey T. Sprague - Citigroup Wendy Caplan - Wachovia Securities Alexander Blanton - Ingalls & Snyder Matthew Summerville - KeyBanc Capita Markets Dean Dray - Goldman Sachs Scott Graham - Bear Stearns & Co.
Operator
Good day everyone. Welcome to the Roper Industries Fourth Quarter Year End Financial Results Conference Call.
This call is being recorded. At this time for opening remarks and introduction, I would like to turn the call over to Mr.
John Humphrey, Chief Financial Officer. Please go ahead Mr.
Humphrey.
John Humphrey - Vice President and Chief Financial Officer
Thank you Sophia and thank you all for joining us this morning, as we discuss the results of our 2007 financial performance. Joining me this morning is Brian Jellison, Chairman and CEO, and Paul Soni, Vice President and Controller.
Yesterday afternoon, we issued a press release announcing our fourth quarter and full year financial results. In addition, we issued a press release announcing the acquisition of the CBORD Group.
The financial release also includes telephonic replay information for today's call. We prepared slides to accompany today's call which are available through the webcast and are also available on our website at www.roperind.com.
Now, if you please turn to slide two; you will once again see our Safe Harbor statement. I want to remind you that today's call will include forward-looking statements, which are subject to risks and uncertainties as described on this page.
Additional information about specific risks are included in our SEC filings. I would encourage you to listen to today's call in the context of that information.
And now, if you'll please turn to slide three, I will turn the call over to Brian Jellison, Chairman, President and Chief Executive Officer. After his prepared remarks, we will take questions from the participants.
Brian?
Brian D. Jellison - Chairman, President and Chief Executive Officer
Thank you, John and good morning everyone. The first slide, just is a summary of what we will go through today, our fourth quarter highlights and then our full year results and during the quarter results, we will look at individual segment performance.
We'll introduce you to the of the CBORD acquisition, why we think it's particularly successful one for us and then we will talk a little bit about our 2008 guidance and cover some information around sort of historical perspective. We've gotten a lot of questions over the last three or four months about what kind of performance would one expect out of Roper if there is this economic downturn and how can we look at 2001 and 2002 and coming out of that timeframe relative to looking at what we could be entering in 2008 and I think that perspective maybe helpful for everybody.
And then, we'll sort of summarize what we said and get into Q&A. So with that, we could take a look at the first slide, which is how the enterprise performed in the fourth quarter.
Here you see sales, orders, EBITDA operating cash flow, operating profit, net earnings and diluted earnings per share all reached the highest level of any quarter in the history of the company. We had internal growth of 14% on the sales side with about 3 points of foreign exchange and total growth including prior year acquisitions was up 20%.
We ended the year with a record backlog, $532 million, which gives us continuing strong performance, which we are going to detail in a second, around book-to-bill ratios. You may've noticed in the first quarter on a nominal quarterly order rate, it was not a double-digit number, but that's really very misleading as you'll see.
Operating cash flow was a $117 million in the quarter, which was really phenomenal 21% of sales. Our operating margins in the quarter were up a 120 basis points to an all-time high, up 22.1%.
We generated a $146 million of EBITDA in the quarter continuing margin expansion with EBITDA actually hitting 26.1% in the fourth quarter and of course, the debts we've reported were $0.77 up 24%. Actually, it would be even a higher performance compared to last year's $0.62 because that included a decrement of a $0.01 on cash and a $0.01 on a higher tax rates.
So, it's not hard to look at 79 versus 62 comparison there. Next slide; if we look at the individual segments, in Industrial Technology they had certainly record sales in operating performance in the quarter.
Internally we were up 13%, driven again by Neptune's automated meter reading shipments and continuing production and very strong demand for an expanded of line of flow meters we've introduced recently. And then, strong growth in South America and Asia for a cold storage products that go out into the Hansen brand.
Margins in the segment were up by 190 basis points, to 26.4% which we think is pretty strong performance. Our Energy Systems and Control segment which does get more and more like protective technologies as we have been saying, had a very strong finish to the fourth quarter.
They were also up, with internal sales up 14%. We introduced a new jet fuel measurement products and a new line of gas chromatography products, which took off very well.
Some of that from our AC Controls acquisition of not long ago. And then, our Process Weighing business which was bolstered by Dynamic and Hardy acquisitions, has performed very well with new products we have brought to the market.
The protected technology solutions we have introduced for marine turbines has been very well received and has driven strong demand in the segment. Operating margin in the quarter was up 50 bps to 28.8% pretax with those favorable new products coming in at higher margins.
Next slide, here if you look at Imaging, it did recover as we suggested it would. It made 20% pretax in the fourth quarter.
Yes, internal sales were up by 9%. If you netted out the Redlake Motion business that we moved into minority investment and adjusted for that in the DAP shipment catch up, we would have been up actually 15% internally.
We had very strong business both in Asia and Europe on our physical science side of the activity, but U.S funding for NAH project is still quite tempered. The DAP situation that we had last year in '07 of course pulled down earnings somewhat, I will talk about that when we get to the full year.
It'll make a little easier comp for us in '08. The RF segment capped off a record year.
We had internal sales growth in the fourth quarter of 17%. Our orders on a nominal basis were down 8% but all of that was driven by the fact that in the fourth quarter last year we booked our Middle Eastern order which was an anomaly.
That project performed exceptionally well throughout the 2007. We got most of the installation work done, a lot of the operating activity and the adoption of tags and readers has come at a faster pace than originally thought.
We got a project underway here in Florida with a open read tolling. That was instrumental and a number of projects in violation processing and administration, which drive long-term recurring revenue that occurred beginning in Q4.
Our Inovonics activity around wireless sensor technology continues to grow as we look at more and more senior care applications for the wireless sensors products and we see that continuing strongly in '08. Operating margins in that quarter were up 320 basis points to 19%.
And total EBITDA margins for the 12-month period came in at 25.7%. Next slide; if you look at the income statement for the fourth quarter only, you can see total sales were up 20%, 14% internal as we said.
Income from operations was up by 27%. And then, the tax rate you can see was 34.9% in the fourth quarter versus 33.7% a year ago, which cost us a $0.01 of share.
And then, the DAPs $0.77 versus $0.62 was held back a $0.01 on the caps amortization requirement. Next slide, here if you look at margin expansion I think, people keep asking me when this will stop.
And as long as we continue to grow, we don't know why it's going to stop. This is really what we do here.
We have a very disciplined governance process. We start with breakeven analysis on each one of our businesses' product lines, customer performance and as we grow we capture more of the contribution margin out of each one of those products.
You can see, we did hit a record Q4 performance of 22.1% and we also like to see how we're doing on a trailing 12-month basis and here you can see, on a trailing 12-month basis, it was 20.9% going back to a year ago that number would have been 19.9%. Next slide.
This is a new slide. We haven't shown you anything quite like this.
You may have done some work thinking about that on your own. This is book-to-bill understanding about how things work here.
What this graph shows is that if you look at... set for line at one and say, if you were up or down by 3% in a quarter, what it like and what that does it's almost all these captures what will happen.
So, occasionally you will have an outside order. During this more than three-year period, you will see there have only been two times in that 3 plus years that we have been out of the book-to-bill ratio contained within a 3% spread.
One of those was the third quarter of 2005 when we booked a substantial project for TransCore in Memphis and in Virginia. And then again, we had the fourth quarter of 2006 where we booked the Middle Eastern project.
Other than that, you can see it's a pretty common situation that we will book in the quarter relatively what we will show. Our business is generally now run on a two to four-month cycle time.
We have lot of recurring revenue, people don't pre-order. We have channel stuffing.
There are no dealers that are handling substantial quantities of inventory for any of our product lines. And so, occasionally you get the one-off project.
But when that occurs in the fourth quarter it may look like our bookings were a little soft compared to prior period, but in reality are book-to-bill ratio for the fourth quarter was a solid one and we don't see any reason to be concerned about that. Next are we will get into the 2007 full year results.
Next slide. Here if we look at the income statement for the full year, you can see sales reached $2.1 billion.
Last year, at the end of the year, we said, we thought we might have an outside shot to get to $2 billion and we actually got all the way up here to $2.1 billion. That's up 24%.
Our income from operations was up 30% and the DAPs were up 26% but cash throughout the year took away a nickel of that stated performance. If you added that back, we would have been at 273 and up even more strongly.
Next slide. Here if you look at margin expansion just for a minute, again I think, it's important for investors to understand how our discipline drives this margin activity.
You can see gross margins in 2005 were 50%. In 2006, they were 50.6% and in 2007 they were 50.4% and that includes bringing on board some business with lower gross margins at the beginning and yet, while gross margins only went up 40 bps during that two-year period, our EBITDA margins went up by 210 bps.
That demonstrates a couple of things; it demonstrates our ability to hold the line on pricing and it demonstrates our operational execution capability, as get better inside the high gross margins that we have. Next slide.
We had very compelling cash flow last year. It's something that people feel quite good about it.
It was a major focus because frankly we were a little bit unhappy with the working capital management in the field in 2006 and it was a very strong focus for operating guys this year and they certainly delivered, you can see that. In addition to driving up EBITDA performance that working capital really help pushes into a phenomenal result here on operating cash flow at $344 million up 31% from the prior year.
Next slide. If you look at how far we have come on cash generation and working capital, I think, it speaks to our governance model and how our folks really do pay attention to what's important.
When we started this process to get inventories down and receivables down and payables up, you can see in October 31 of '02, which was fiscal year end close for 2002, inventory was 13.2% of sales. This past year on December 31st, our inventory was down to 7.8% of sales.
Our receivables has dropped from 20.8% at the beginning of this journey the 16.1% and our payables and accruals when you net those against, you can see that the net working capital number dropped from 18.9% to 10%, that's a 890 basis points improvement over this five-year journey and what that means is we need $200 million less investment that generates the level of sales today that we would have, if we had not made these improvements back five years ago. And then, people see the improvements as you did in '06 and say, wow you got the net working capital down to 11.4, it will surely stop there, and of course, it doesn't because of the way we measure, the way we help, the way we guide and how well our people performed.
So, we picked up another 140 basis points in 2007 and we still think there is an opportunity a little bit more on the receivable and a little bit faster turns in inventory. Next slide.
In terms of individual sector performance, here you can see across the board we had very solid contributions from everyone. The RF segment came in and these are all rounded numbers at 26%, actually moving past Imaging, which dropped in the last at 24, industrial at 30 and energy at 28.
And then, Roper where we consolidated all the corporate expenses came in at little about 25 as you know on 50% gross margins. First segment we look at today is Industrial Technology.
In 2007 our revenue was up 17% and industrial technology orders were up 8%. The RF integration activity around automated metering at Neptune certainly was a major contributor to that it's at all-time record here in '07 and we continue to gain share not only in the automated meter reading but frankly in the core of water meter business itself, in both commercial and residential applications.
We converted to direct sales force for strewer [ph] and some of the other material handling businesses and that drove added growth this past year and we think positioned us well for the future. And then, we had strong growth in agricultural and industrial and gas fluid handling end markets, pretty well across the board in each one of those businesses.
We had particularly strong growth in our ammonia cold storage safety technology from America and Asia where there was substantial expansion of our cold storage activity and then we had something that was particularly heart warming occurring late in the fourth quarter as carry over well under the first quarter, we got a first real sizeable international order for Neptune products that we have been working diligently at and Chuck and the team they have done a terrific job and those shipments will really help bolster our first quarter and should offset whatever softness we might see in the residential market. Operating margins in the year were up 220 basis points to 25.6%.
We are particularly proud of how well Neptune perform in the face of very strong cost/push inflation out of the copper going into their meter products and all of that and more was offset by reductions in our electronics and in factory throughput capability. And then, customer intimacy and cost discipline really improved margins in everyone of the other businesses.
Next slide. If you look here at Scientific and Industrial Imaging, you'll see that for the year sales and orders rose up 11% and that was in the face of difficult period at DAO as you may have remember what the touch-screen problems we had from a vendor.
And then of course, the moving out of our Redlake motion business. Key drivers were really physical science products that went into the Asian and European markets.
U.S remained weak with poor funding out of government research avenues. Market demand did drive double digit growth in our medical business for infection control and biopsy systems.
That would be Civco, Medtec and SynMed. Margins for the entire year came in at 19.5%.
I suppose we could have rounded that to 20 we have attempted but it was 19.5. And that was pulled down a little bit by Redlake Motion exit costs and substantially by the DAP problem which is now behind us.
We did get back in the fourth quarter to 20%, which we indicated we would on our third quarter call and we took some pretty aggressive actions here in '07, and I think you will see the results of that in our margins in '08. Next slide.
Our Energy Systems and Controls business was up a modest 52% as you can see in orders of 50% sales. They of course, were benefited by a series of bold-on acquisitions and the outstanding performance by Dynisco in '07, which we acquired in '06.
We pretty well did everything we said we would do in Dynisco. We brought in a world-class business leader into that business.
In our view, it's got off to a very good start and we have a lot of opportunities. The other acquisitions in Protective Technology have actually outperformed our first year goals and are helping us achieve kind of guidance that we have laid out for 2008.
The shutdown controls that we have launched for diesel engines have been very successful and the sensor technology and process weighing we are doing for people to assure themselves that their asset optimization and waste containment and spoilage and the things that they need to see for controlled technologies are working well. And we introduced some new products into the hydrocarbon analysis business and the gas chromatography business that have performed well.
Margins in the segment, which includes the acquisitions, which of course come in generally at lower margins. Margins still have 24.5% for the full year and that includes $8.3 million of non-cash amortization in there.
If you add back the non-cash amortization, then you will see the margins were substantially higher. And the improvements continuing in the acquired companies, as a family they came in at about 24% EBITDA and about 16% pretax.
So if you adjust for that you will see that the underlying core businesses all had the record performance. Next slide.
Just to remind us of the protective technology acquisitions that we made, which are part of the 474 million of investments in the last 12 months that include Roda Deaco and Hardy Instruments, Dynamic Instruments and DJ Instruments. Those are all performing as we indicated they would and we think they're going to perform a bit better if you are in '08 coupled with the CBORD numbers that deliver really excellent results against our purchase multiples.
Next slide. If you look at the RF technology, this was up 21%, orders were up 13% on an internal growth basis, sales were up 19% and orders up 12%.
A big driver of that of course is the Middle Eastern project, which actually came online faster than some expected. We got more reader shipments in country due to faster installation and the design execution and the initial phase of operation has produced a series of follow-on orders as tag shipments have exceeded peoples' expectation around the adoption of the usage of those in country.
We also had very strong replenishment and upgrade of our ego tags in the North American market and then the freight matching business expanded throughout North America, both Canada and the U.S as a 360 Program that was launched, performed well and people added services to their underlying suite of products. And lastly the Wireless Sensor business performed well as we found new applications and new outlets OEM arrangements.
Operating margin as you can see for the year was up 340 basis points to 20.7%. We got certainly leverage on an outstanding mix of product and improved better in our non-product portion of activity around basically subscription services that we do for people and those came in at higher margins due to productivity increases.
Next slide. If you look here at the acquisition process, it continues to add value.
We're able to invest $474 million in the past 12 months. Those businesses are going to produce well in excess of $150 million to $165 million or more of revenue and perform at very solid EBITDA levels, frankly generally higher than the overall company.
They all have the same criteria and if we look at the CBORD directly for a moment, you will see, you can check the box was an asset business absolutely. It has very unique business model, we will talk more about in a minute.
A very low CapEx, certainly no need to invest more than 1% or 1.5% into the business annually. For us, immediately cash accretive.
It's a terrific market structure, but one of the things that's phenomenal about this business is that with existing customers, we only serve may be 15% of the sweeter things that we can do for them, that's going to drive long-term revenue and the driving forces in these markets are all coming our way and today a lot of them are related to healthcare and university campuses, but they are whole plus of opportunities in other educational venues. Management comp notice is important to us, we have signed up a leadership team with...we are happy with the subordinates as they would be known and some marvelous group of folks with a lot of intellectual capital siding and I think another placements around the country.
The incentives as always are linked to the commitments, people have made to us. That's a business that's going to do an excessive $8 million to $10 million a month this year and revenue and is going to do substantially more than that in 2009 with EBITDA performance well above $35 million next year.
We are going to preserve core values in that business because we think they are outstanding but we are going to encourage them to invest faster to grow more and to reach out to international markets, which we have been successful doing. I don't think anybody thought, we will have the level of international growth, we have had this year and we will talk about that later, but yet we do have global reach.
Our governance process are just barely underway. We have been at this discussion on acquisitions for months now and so that I know that all of the folks are implicate know how think it would feel.
And we have committed to them as we would to you that this must have liked for being bought to grow and we will achieve that. If you look at the next slide just in sort of a one line quote for us, why do we love CBORD.
The answer is for us it is a perfect match of security, healthcare and information for end users. But it's all hold together in one single integrated platform with an exceptional leadership.
We have worked exceptionally hard to find people that get us into the educational markets, healthcare markets and people let that have a core desire to serve customers and those are very hard things to find and to find one team with both the products and the service mentality and softer capability and the reach in country and the desire to be worldwide is a unique gift and we were very glad to be able to pick up CBORD and make it now our third cash register, flat form for our customers it just a step of being transparent. With that I would like to ask John Humphrey to take you through some more details about the end markets of CBORD and how we see it fitting in to the enterprise.
John Humphrey - Vice President and Chief Financial Officer
Okay. thank you Brain.
On the next slide talking about the CBORD group, just kind of what it does it's the leading supplier for integrated card systems, security solutions and food and nutrition management software, serving the markets to buy that Brian talked, their expensive software capabilities across the enterprise, very high degree of recurring revenue which I will talk about on in our future slide. And the experience leadership team really demonstrates the type of commitment and passion that we are all so share.
It does have a 30 year history with long established customer relationships and offers multiple growth opportunities not only among itself but also with the application of other activities and technologies that we have inside the radio frequency. Providing channel access into those markets for TransCore and Inovonics and it will be able to help CBORD grow even faster on a global basis.
You go to the next slide; talking a little about the university and college markets. There is some very good growth drivers here, in terms of increasing demand to be able to utilize this one card in the wallet idea, for all of the students and type of the members.
To be able to utilize that now only for transaction services but also for other integrated campus wise solutions that's electronic access for getting into buildings or chemical labs or other recreation building facilities. So that single card will be able to migrate not only from food service and buying whatever the student might be on campus, but also allowing them access into the areas that are authorized for.
There is growing discretionary spending both on campus and off campus use and CBORD has the unique ability to be able to take this close loop network with inside the university and be able to expand it into off campus retail applications as well. All really expectations for high-quality food service solutions type of software that CBORD has will really enable that.
The CBORD solutions you can see at the bottom of the leading provider for this single card solution transaction services. And a food service management allows them to manage not only their own internal inventory levels but also provide better nutrition information for the customers.
Next slide. The specifics around the card systems which is really the core of the offerings into the university market.
It's the one card in the wallet that the student will be able to use to, really do everything they need to do during the today, whether its access, whether it is purchasing, whether it's understanding how and how where to go. And if we are able to take that as I said into our campus commerce through the student advantage and off campus advantage branch and in addition there are follow-on software and the other hardware sales so not only thus the card work, but also the integration with locks and integrated security which include video and integrated access solutions.
All under the brand name that you can see on the CS Gold, CS Access, and OdysseyPCS, it is used not only in university situations, but also in any type of large multi-facility or multi-access point campus solutions like the aviator sports and recreation which is up in the New York area. Moving to next slide, the same solution works very effectively in the hospital and manages care markets, where you have some of the same types of growth drivers where aging population is leading to a more managed care facilities and nutrition services are becoming a very important part of the treatment.
In the food service management and the ability for customers in that environment to know exactly what nutritional information they are receiving and have been able to do that in a very seamless way. It's an important part of what CBORD will be able to offer.
CBORD already has 1700 major healthcare licensees and are serving the half of the hospitals with over 300 beds in the US. However, that shows that number of the facilities that are utilizing CBORD today and as Brian mentioned, very few of them are taking advantage of the full suite of services that CBORD we will be able to offer.
Next slide, as you can see on the slide 27; this is really a blue chip customer based major leading universities, some of the best hospitals across the nation and other campus and food service locations. Suffice to say that the customer diligence here was quite easy to perform and types of customer satisfaction rates is not something we see very often.
And then finally on the next slide, it's only a unique business model that's been the improvement over a number of years. It's a very high-degree of recovering revenue.
In fact, about 80% of CBORD's revenue is generated from existing customers every year with the substantial portion of that being annual prepaid subscription fees, so they can continue to utilize the software and services CBORD is available and provide for them and to make their campus lifestyle much more enjoyable and then along with that of course we're able to expand the suite of services and additional applications for those exiting customers. And the customer attention rates here exceed 95%.
Once CBORD has a customer here with the customer satisfaction in the Integrated Solutions there is a very a high degree of the recovering revenue that's pretty notable. We don't employ asset like business and with the prepaid subscription model as that's the very good for working capital.
Working capital is extremely low in fact pretty minimal rounding to a very small number and capital expenditure in the 1.0 to 1.5% of revenue once again picking off one of the key criteria that we look at. And EBITDA margins above the Roper average and as Brian mentioned, there are multiple growth in the market solely in expanding with healthcare and universities, but also looking at international opportunities.
So, with that Brian, back to 2008 guidance.
Brian D. Jellison - Chairman, President and Chief Executive Officer
Okay, thank you John. So we go past 2008 guidance slide.
First, with below our historical perspective about trying to answer questions people had about so, you know I read people talking about how Roper will perform in 2007 to '08 based on what is, what it might have done in 2000 and 2001 and I just want to clarify few things about the company we are today, you know, the vast majority of our business is coming from secondary growth in water and RFID, in security and software applications, recurring revenue business models that really off set much of the risk to the economic downturns. In 2001 and 02, Roper had 10% of its total sales coming from Russia and those were at extremely high levels of profit contribution.
Today that is a totally de minimis activity. Second big contributor was semi-conductor capital spending around water resist pumping technology, as people building out the industry and you have also the automobile motion photography business which was primarily domestic market, neither of those who material in any way to the enterprise.
Our asset velocity in 2002 was 18.9% of sales. Today our asset velocity is 10% of sales.
That freeze up a lot of case and also equally importantly, they are not going to have inventory risk not going to have any kind of adjusts that occur in situations where you had been operating in a different kind of a business system and we really transform the company during these periods back in 2001, ISO is a holding company you know, at more into little more of an operating company is we created a it segment strategy and then it went into the market driven industrial. We are proud that the things we bought today is truly a diversified growth company and it has pretty well eliminated the older cyclical risk that people associated with Roper to suggest that whatever it is today has some relevancy to what it was five years ago is that do not really understand what the company is now.
The next slide, if you look at the historical perspective around Roper, you'll see the key changes in driving courses for the enterprise today, almost all of which didn't exist in 2001. Today you have water metering and usage information and collection, you have RFID technology application and solution at the high end of the market.
You have great matching and logistics that have to do with asset protection and utilization. You have protected technologies that are protecting and awarding people about their asset utilization, you have long-term contract with renewables.
CBORD alone we expect to have over half of the business, the sample subtraction and renew. Patient positioning that has little or no risk CMS reimbursement issues, you have a very good reverse international business.
I think people have not focused probably are found on house to home owner international business, because people ask me too often but it is all domestic now with Neptune and TransCore. What part may are international sales in 2007 were $859 million, 41% of total revenue.
I would continue to have high gross margins of low CapEx and we have a very strong balance sheet. Next slide, if you look at how our position going in, we have got industrial margin performance that we believe the gains we made this past year will hold and could actually improve.
Our international sales for water meters will actually have an impact to the first time in the history of Neptune's activity and are going to help us offset any weakness that might occur in some of the residential markets although we have seen that effective with the business in any measurable way. We have growth in our recently acquired protective technology businesses that is going to add the EBITDA performance in '08 and then in future.
Our Compressor Control business which separate goal period of service revenue has slowness back as current fourth quarter it is projected to do well in '08. Our Z-tech business, which launched new nuclear testing platforms last year continues to grow nicely and is well at the front of the curve for activities that is going to occur there.
In our energy businesses in total, for the first time entering a year we actually have a complete absence of negative usually. There is one at the businesses that will have some kind of headwind or something and at the moment, none of those businesses have any headwinds they have strong backlogs and have a very strong projection for their performance throughout the year.
And we continue to see both of our opportunities both in the energy and protective technology reason and in surface and you can see an improving climate for acquisition total. Our next slide, if you look at our Imaging business it has easier comps in '08 because of the Redlake loss has been behind and then the key four margins they got back to a more acceptable level, will easily be maintained in '08.
Our view should it back through, we have growth in the security camera and teleconferencing activities we have been doing the teleconference with 20 people to follow we are going to add opportunities to do that in another venues. The RF opportunities continue on our Middle Eastern projects is that continue to build out at a faster flip than originally thought.
Our CBORD acquisition gives us tremendous new capabilities and channel access to markets, we couldn't have got to without to, our leadership team like this and an install base like to have. And our Rugged handheld application business, which JLT in the new technology we are launching and Black Diamond has growing applications.
So, I think we are going to be able to expand beyond kind of FedEx and baggage handling into some other exciting area. And the acquisition update we mentioned are continue to approve and well pricing, we think is not as just as it should be for the Credit Suisse you can see things move in our way pretty quickly.
Next slide, on 2008 guidance, here we established DAPs guidance here at 310 to 320 for the year up from 268 which was the year end number this past year, and the EBITDAwe think will exceed $600 million for the year, net earning will exceed $294 million. I am aware of focus just for a moment about the depreciation and CapEx, because our operating cash flow as you can see we are guiding will be an excess of $130 million of net earnings.
The reality here is that occasionally people say Gee, that they would not spend much money on CapEx. Well, it's not true, we don't need to spend money on CapEx, our CapEx as you can see in 2006 was $32 million our depreciation was $30 million.
In 2007, depreciation was 32 and CapEx was 30. We are going into this year thinking we'll probably have depreciation around 32 million, we probably have CapEx a little less in that.
We simply don't have a business model its first talk America with vertical integrated factories that had whole lot in their business. What we have is a wonderful business with whole lot of EBITA.
And that intangible amortization and non cash expense has a heckable lot to our operating cash flow and a free cash flow at the enterprise. This is an outstanding business model going to ten yearly progressively up.
Now in summary, what you have our actions would have been taken in 2007 and investments made to position us extremely well for 2008. We have a record backlog as we entered the first quarter.
So, we think we will be after the fast start. In the past 12 months, we have deployed $474 million in capital.
In transformational deals for both protective technologies and RF segment and that is really an amazing breakthrough because its all have been funded out of free cash flow and our strong balance sheet. We are in a situation if you go back to December 2003, when we made our investment in Neptune, we paid $500 million.
We had the issue of equity, we had the issue convertible securities, we had the issue of public debt and we had to completely recapitalized the enterprise on the debt side. In December of '04, we invested $600 million in TransCore, we had to issue equity again, we had to completely refinance the company on the debt side.
Here we have completed in the last 12 months of nearly similar kind of investment 474 million and has not had to do anything in the way of equity issuance or anything in the way of convertible debt. And we are in a marvelous situation today with our on going balance sheet.
If you just think about this investment which occurred on Wednesday for $367 million, it has a benefit of $23 million tax benefits such as net of debt you are at $344 million and guess what our operating cash flow for the year was $344 million. So, we like where we are.
We think we have achieved a lot for our investors, we think we're going to continue to achieve a lot. The significant reductions we got in networking capital and operating margin expansion drove that cash flow and our international sales grew 41% last year.
So, we are in a global business here. We went up from $610 million in '06 to $859 million a 41% increase so it happens also be about 41% of total sale.
The U.S sales grew 14%, we expect record performance in '08 with over $600 million of EBITDA and 130 plus cash conversion and with that we will open into question.
John Humphrey - Vice President and Chief Financial Officer
Cynthia are you there? Question And Answer
Operator
Are you ready for questions, sir.
John Humphrey - Vice President and Chief Financial Officer
Yes, we are.
Operator
Very good. [Operator Instructions].
We will take our first question from Christopher Glenn with Oppenheimer. Please go ahead.
Christopher Glynn - Oppenheimer & Co.
Thank you, just want to follow up on the international team, little bit. I think three things that's stuck to me over the prior year you had the Middle East project in the tolling and recent press release on electronic equal registration Bermuda and today you mentioned the first international deal with AMR I believe, so that mean what kind of signals with those on traction and streak credentials per really showing those, those pieces a little bit that's how international?
Brian D. Jellison - Chairman, President and Chief Executive Officer
Well. we didn't really say anything about America we talked about Neptune business and water meters.
Christopher Glynn - Oppenheimer & Co.
Okay.
Brian D. Jellison - Chairman, President and Chief Executive Officer
And that's not automated meter reading, we are actually talking about installing water meters in residential mode and it may made well include AMR technology associated with it. But its not necessarily being met with the AMR technology one its own.
It's an integrated kind of a business. I think that when you are taking business more into global venue and takes a time to build scale and what we do is we have the ability to get people in front of the right individuals.
We have the ability to add scale increasing to what anybody is going to do and its always is easier for somebody with a $5 or $6 billion market capitalization to come in and talk to foreign country about what there is smaller entity is going to be able to do to sustain itself. It can do usually do better job on working on letters of credit and sophisticated contracts and local service.
So, the growth in our international business was strong in the year prior, if you excluded those growths, you still have very substantial growth across the board and in our businesses we have wonderful international based operation businesses that continue to grow nicely. I think that our growth focuses a core competency throughout all the businesses we have and the various its going to point to pop-up in an area you don't know.
We are focused on all of markets that we can get access to with a right kind of product mix. It so happens that you had a very strong international performance last year.
And because we don't tend to detail where everything is going everywhere, we probably have under educate people on the strength of our capabilities internationally. That's why I wanted to cover it in the summary today and read it in the K when it's released, but it that...
probably deserve the conversation we created.
Christopher Glynn - Oppenheimer & Co.
Andwhat are you seeing in terms of the market ability of electronic vehicle registration in the U.S.?
Brian D. Jellison - Chairman, President and Chief Executive Officer
Well we think its time has come but we are a provider I think its going to have an exceptionally slow growth execution process there is a lot of forces aligned against it we work hard to try to demonstrate how valuable it can become but there is no application in the U.S. today for electronic vehicular registration in the context we are doing in some other parts of the world.
Christopher Glynn - Oppenheimer & Co.
Great, thanks very much.
Brian D. Jellison - Chairman, President and Chief Executive Officer
Welcome.
Operator
We'll take our next question from Michael Schneider with Robert W. Baird, please go ahead.
Michael Schneider - Robert W. Baird
Good morning guys and congratulation on a great quarter in year again.
Brian D. Jellison - Chairman, President and Chief Executive Officer
Thank you Mike.
Michael Schneider - Robert W. Baird
Maybe we can focus on Neptune for a minute and stick with this international theme but... it was my understanding the reason they had not gone overseas was principally because of differences in code specifications and measuring our measurement units etcetera, can you describe and I guess what's going on in the product design or adoption it really what is the market size or can you address the global market or is it only English speaking and English measurement countries.
Brian D. Jellison - Chairman, President and Chief Executive Officer
The market globally have hasn't changed I mean you are right. If you look at Europe oil pressures are different they are lot more submetring plus individual residential, things like that this is a an application that we have been looking at for a while so there are pockets of opportunity where you have situations that are existing technology is exportable and we have been able to be successful recently in three of those but we haven't redesigned the product this is our existing product and our existing data capture capability getting applied to markets that I think people fortunately for us weren't focused on didn't realize we were there and after they matured a little bit it will probably talk a little bit more about it and why they were, today you couldn't say that we think Neptune is constrained internationally by markets that have different water pressures in different sizes and configurations but fortunately there are pockets of opportunity and we tend to be pretty good figuring out where they are and seeing what we can do in them and this is one in an emerging country that happens to have very solid desire for world class infrastructure and so we kind of participated in that strategy for them.
Michael Schneider - Robert W. Baird
Okay and then as far the domestic market goes have you done any sensitivity analysis to Neptune disclosure as states begin run budget deficits now and just wonder 39 deficits right now what is impact is on just core meter spending and I guess what are the most recent trends?
Brian D. Jellison - Chairman, President and Chief Executive Officer
Well that the only place that we really stated the country that's that had measurable flow back in the state of Florida, there is some unique things going on down here but we have looked that at more than a 25 year trend of different economic down turns, Neptune never had our...a flat or negative number the worst case preferred three times in the last 25 years and it had 3% of revenue growth so you know they feel confident that they going to have another record year in 2008 they will get benefited from some of these international stuff, they probably as not a year they can grow at 10% if things continue down but I would better against them, that any body can do as they can.
Operator
We will take our next question from Jeffrey T. Sprague with Citigroup Investors Research.
Please go ahead.
Jeffrey T. Sprague - Citigroup
Hi good morning everyone?
Brian D. Jellison - Chairman, President and Chief Executive Officer
Hi good morning Jeff.
Jeffrey T. Sprague - Citigroup
Can we quick really a little bit more on CBORD certainly looks were unique from our return stand point while it does I guess part parcel is that kind of out side kind of that window EBITDA multiples you use to talk about just on some rough map based on what they said?
Brian D. Jellison - Chairman, President and Chief Executive Officer
No its pretty high margins business Jeff. We are just not get too specific about that and then and it is something we have been working on for months and it has you know, some unusual synergies for us with existing businesses, so it is it certainly at the high end as any multiple we have ever paid but its...its well worth it because of the cash it generates and the growth it has.
Jeffrey T. Sprague - Citigroup
You just to be clear do you own it as if Wednesday or you?
Brian D. Jellison - Chairman, President and Chief Executive Officer
Yes. We closed Wednesday...
we close Wednesday when we issued two press releases, that was just so I mean so closed, literally we paid the cash on Wednesday it, So it is a Roper business effective today and it will generate you know we tend to look at first year EBITDA performance it because, trailing multiples and adjusted EBITDA are properly lot of difficulties particularly when you are working with, with our friends in private equity. This is a business its going to generate over 35 million as EBITDA in 2009 and its going to grow nicely.
And you know, that when you look at the fact we're picking up to $23 million tax benefit against the $367 million purchase price, we will have a cruise over time, I still going to come you know a fairly nice pay so it fits within our you know is not paying over 10 times next years number.
Operator
We will take our next question from Wendy Kaplan with Wachovia. Please go ahead.
Wendy Caplan - Wachovia Securities
Thank you, good morning.
John Humphrey - Vice President and Chief Financial Officer
Hi, good morning.
Wendy Caplan - Wachovia Securities
And I guess, CBORD is the most important question to be asking this morning and we seem to be a little live on details, is there a reason for that?
John Humphrey - Vice President and Chief Financial Officer
Well, it closed Wednesday and you know, we are riding welcome to Roper letters and the press release side what details would.
Wendy Caplan - Wachovia Securities
So, I guess in terms of, it sounds from your comments so it's about a 100 and 120 million in revenue, is that right?
John Humphrey - Vice President and Chief Financial Officer
I think it will do that kind of stuff over the next 12 months it's current run rate is around 8 to 10 million.
Wendy Caplan - Wachovia Securities
Okay. And the competitive environment in terms of market position or shares?
Brian D. Jellison - Chairman, President and Chief Executive Officer
It is a strong when most people think about CBORD they look at another publicly traded company called Blackford. They resemble BBB and Blackford you can get some sense about how people feel about the multiples of that enterprise and what is worth, they are in all line of other educational aspect that CBORD's not in and CBORD are much more focused so they really are they would see each other occasionally on campus, but I think they, you know, we don't know Blackford well.
I think they have their own unique business model what we see when CBORD is an opportunity to invest in the business from a growth perspective and to look at global markets and moving out on a variety of sweeter products they have to offer and by getting access to our engineering capabilities that exists in radio frequency and some unique things we're going to do with antibiotics as well sensor technology and CBORD's existing marketing plans and capability.
Operator
We will take our next question from Alexander Blanton with Ingalls & Snyder. Please go ahead.
Alexander Blanton - Ingalls & Snyder
Thank you. By the way as before I said, operator is cutting people off, not allowing them to have a dialogue receive.
Brian D. Jellison - Chairman, President and Chief Executive Officer
Yes. I think Alex its two questions at a time and then I know that for back for the follow up.
Alexander Blanton - Ingalls & Snyder
I went to the CBORD's website last night. It's very, very interesting and I recommend to look at it.
On that site there is a press release in January 10, 2008, a new computerized campus exit into the CBORD and the itself is stale black. So that gives you the idea [indiscernible].for quite of few years, if that is the case that you have been talking with the people and thinking about this company and could you just give us a little background on that and lets move into business very, very well?
Brian D. Jellison - Chairman, President and Chief Executive Officer
Yes, it is a...you've certainly, you wouldn't be wrong about that. I do believe that CBORD had some relationships there.
They have relationships with other people. Yes, I do know that company well because of that people that I know and you know everybody has always spoken highly at CBORD.
I think that this is sort of what we do, we look at private equity, we look at things that private equity earns, we have kind of wish list around the assets but we I think eventually would become available, you know, we broke, whether they might be available. In this particular case I could tell you we had advisors work with us like Hal Rich, and Niels Nielson and they were close to the private equity people and were well aware that they were considering doing something.
They had probably different ideas always these things are so attracted but would have been an easy IPRO wide range of things that I could do to private equity people to own them are very sophisticated folks and we got the wonderful door opening opportunity as a result of that and one thing led to another and today we are proud owners of what we think, we think it's a great company.
Alexander Blanton - Ingalls & Snyder
But I wonder if you had kept in contact with these people?
Brian D. Jellison - Chairman, President and Chief Executive Officer
No I didn't, I do know people who did but no I didn't have any prior relationship with CBORD.
Alexander Blanton - Ingalls & Snyder
And the second question is on fourth quarter orders, you said a lot about full year orders but not too much about the fourth quarter. I think it because of comparison sir or other difficulties that you mentioned in some cases?
Brian D. Jellison - Chairman, President and Chief Executive Officer
Well orders is not bad, there were up I believe 6% or something. They have pulled down a little bit because we can't really adjust for the red like thing, but the book to bill is really strong and as long as the book to bill is with the true...
the way things go, you know, we are satisfied and so we wanted to talk about the book to bill ratio at the enterprise level so people would kind of get a sense of what is there because we had an anomaly there in the fourth quarter of '06 and we thought it needed to be exposed I think some people saw that comment around it this morning but we are not seeing any kind of major fall off in order flow in the company. So, frankly as we went through the planning process and we just had our strategic plan and kind of offsite with the board in January and as a different segment, leaders making their presentations and I think people felt strongly about our idea and I think that's reflected in the guidance we established for 08.
Alexander Blanton - Ingalls & Snyder
Thank you.
Brian D. Jellison - Chairman, President and Chief Executive Officer
Welcome.
Operator
: We will take our next question from Matt Summerville with KeyBanc Capital. Please go ahead.
Matthew Summerville - KeyBanc Capita Markets
Good morning, just couple of questions CBORD, Brian, how much of CBORD business would you say is hardware versus subscription versus software?
Brian D. Jellison - Chairman, President and Chief Executive Officer
Well the subscriptions review and the service related to are more over half the business, the hardware raised would be the least portion of the activity. CBORD acquired a Diebold's Access Control business for these kind of applications and haven't owned it very long and they are really improving that business at a very fast pace.
So, may be a third.
Matthew Summerville - KeyBanc Capita Markets
Okay and then you have any sort of market breakdown for CBORD in terms of how much this colleges, universities versus healthcare versus some of the other markets you highlighted in the press release and then the same thought domestic versus international sales there?
Brian D. Jellison - Chairman, President and Chief Executive Officer
A very little international sales, I do have some in those countries that we mentioned in the separated dedicated CBORD press release, which you can see on our website. But the opportunities internationally, when we were discussing this with the board you know, it's our international folks on board.
We have already started a process to look at some dialogue outside the country for these applications, that's where myself and others are well aware of opportunities, better if there. I think that the college, university piece, just in the swag as probably you know 60% to 2/3rd with healthcare being kind of being 1/3rd.
Matthew Summerville - KeyBanc Capita Markets
Okay, great and just back to Neptune, how much of their business in '08 based on your order flow you are seeing international, would you anticipate the non-US?
Brian D. Jellison - Chairman, President and Chief Executive Officer
That we take Neptune you ask, I'm sorry.
Matthew Summerville - KeyBanc Capita Markets
Based on the order flow you seen outside the U.S?
Brian D. Jellison - Chairman, President and Chief Executive Officer
Well, what we have is a ... we have strong sales in the Canada, we have strong sales in the Mexico and now we have a unique relatively a meaningful sale into another continent that is in its early phases was significant shipments in Q1 what will happen to see that build up goes and how quickly these people can kind of simulate the meters regarding going country and do training and help the installation get going side, I don't know it's not going to be enormous, but it certainly not to offset what we might have thought was a little bit more risk in 08 now we think we have put.
Matthew Summerville - KeyBanc Capita Markets
Andthen just one quick question on TransCore and then I will wrap up. Outside of the opportunity in middle east and I apologize if you already hit on this but can you talk about what you are seeing internationally in that business and what other opportunities you see on the horizon there?
Brian D. Jellison - Chairman, President and Chief Executive Officer
It is the unique business in terms of it having public interest and the people not allowing us to comment on what we are doing where but I can tell you because of the extreme visibility of the application that's in place now and the rate which it's growing that we have a record level of inputs and other countries in the region and in the area and so we are certainly active with a lot of dialogue. I do think that it takes months, if not a year to get anything to happen as those things are on hold, but I know people are surprised about the speed with which we have executed this and the effectiveness of what we have done in a very harsh terrain.
So it can only help where we are going.
Matthew Summerville - KeyBanc Capita Markets
Great thanks a lot Brian.
Operator
We will take our next question from Dean Dray with Goldman Sachs, please go ahead.
Dean Dray - Goldman Sachs
Thank you. Good morning, Brian I would like to hear some of the additional assumptions baked into your 08 guidance if you could, should you think its true why internal grow of assumptions for 2008 and maybe how you expect the US versus international script, would be an and how about a contribution from pricing.
How is pricing looked in 07 and we do you think about 08?
Brian D. Jellison - Chairman, President and Chief Executive Officer
Well, I think if you look at pricing, we showed the chart with a gross margin for the last 3 years which has been hovering between 50.0 and 50.4 so, we are not seeing difficulty in pricing we do certainly some bid work, all the time but prizing pressure hasn't been unduly harsh. I think that, we find it consistently we think we have a growth of 1.5 to 2 times in GDP but if you have a notebook economy, you are simply going to through in mid single digits at 6% or more and totally even if there isn't any growth in the economy, we have gone through a period like that to be able to say what that growth really will look like.
I think that you do have a certainly all of our businesses that are focused on America and Asia are going to continue to do well, we don't have a lot of exposure in Russia because of historical activity there and we don't have a lot of exposure in India because the kind of products we have generally are not... adoption rate there is relatively modest.
So, if you think about four percent [ph] area for us going to be more in south America, Asia and China and those markets continue to be robust.
Dean Dray - Goldman Sachs
And what specifically is the internal growth assumption for 08?
Brian D. Jellison - Chairman, President and Chief Executive Officer
Don't have a one we are not providing any revenue guidance, we are worried about our cash flow and our EBITDA and we are lot simply worried on debts because everybody is interested. We just make it about cash on cash returns of getting that assets, think down and lets continue to do transaction with our shareholders frankly and that's all we going to do.
Dean Dray - Goldman Sachs
Sure, and then, second question related to the pipeline and NM&A, I recall back in November, you talked about three potential deals coming down to the wire, sounds like CBORD is one of them, about the other two and what does the pipeline run?
Brian D. Jellison - Chairman, President and Chief Executive Officer
Well pipelines are still very good, I mean we ... we've been dancing around because of our CBORD being in our view the most attractive thing that you could do and needing to get it done and making sure we ...
that we maintain our flexibility. We have winded the worlds depositing CBORD, we are not fully interest seeing any longer then we have a wind up we are continuing to have conversations about that's interesting.
But the opportunities and the number of downfalls we've had in ... frankly from the beginning of the year, it is pretty solid and we have opened a dialogue on a lot of different things but will be opportunistic in terms of what we do, we don't have a budget around what we are going to achieve, I think you know, we spent $474 million in the last 12 months and we got a run rate always to able to do $400 million or $500 million over in '08 12 months period and our strategy we need to keep the balance sheet of labor that in a way that is friendly to shareholders that keeps us investing great.
Dean Dray - Goldman Sachs
Great. Thank you.
Operator
We will take our next question from Scott Graham with Bear Stearns. Please go ahead.
Scott Graham - Bear Stearns & Co.
Good Morning, Very nice quarter.
Brian D. Jellison - Chairman, President and Chief Executive Officer
Thank you.
Scott Graham - Bear Stearns & Co.
I just wanted to maybe look at the book to bill little bit differently. If you don't mind I understanding off course that you have tough comparison and book to bill is not the perfect way to look at you guys, but when we expect the RF business because its obviously got its own unique dynamics the rise in orders versus the rise in sales this quarter well there is a pretty big discrepancy there, and really the rise almost if you wanted to call that a sort of percentage book to bill was a the rise in orders was only about 60% of the rise in sales and again recognizing that have, have tough order comp on some of the other business.
I am just wondering if you not giving in organic growth assumption for 2008, may be shed some light on the book to bill may be from that perspective and why you feel you know comfortable with you know the guidance that you have given because its don't look like Brian that the businesses particularly scientific and industrial with those businesses underlying water trends have, have the pre notably slow then last couple of quarters?
John Humphrey - Vice President and Chief Financial Officer
Well I think Scott this John. I think we talked a little bit about what's going on inside scientific and industrial imaging and particularly the impact from the touchscreen and the fact hedge funding is that historically low levels in that US which does effect come on a secondary bases some of the in market demand for some of the higher and camera applications that we have there that it is one those areas inside the imaging where we have not add in control of the end user demand as we are across the other parts of the enterprise.
And then as you, as you going to feel the union I mean obviously if you fill the back part you will obviously see some anomaly inside there industrial technology is the other area where because of the occasional projects that will happen inside Neptune, you will also get some anomalies and with in lower private list out every single one of them on the book to bill, chart that we provided, but as we look at it and as we need continued to work with the business, they drive down there cycle times, increase there recovering revenue. We would look this year situation with there book to bill is always at one because they are getting the order on Monday and they are shift in order on Tuesday, and so we are...we are continuing to move towards that direction, but we do have some projects that we will occasionally make that a lumpy apart from different parts of business.
Brian D. Jellison - Chairman, President and Chief Executive Officer
I know, I think you are missing the full year versus one quarter and you are also missing the fact that we have Redlake Motion business we contributed others, which is not adjusted to more in base. So you are getting on a flat basis that you look you don't have apples and apples.
Scott Graham - Bear Stearns & Co.
I agree, I agree with that, absolutely I am still, I think that the discrepancy is more than that however, never less if in fact there is something that occurs in the first half of this year that may be reduces you know the volume that the in take pace of orders, Brain what do you have ready right now in terms of cost reductions that make sure that the guidance staying put?
Brian D. Jellison - Chairman, President and Chief Executive Officer
You know, its got a, I know you are interested in cost reduction we are interested in motivation and we are interested in land market growth, we are interested in custom service, we are not a traditional manufacturing company, we are not a machinery company. We are not a company that has heavy assets, we are a company that you can see as $30 million of depreciation and $about 30 million of CapEx as it doesn't match the profile been able to business did you cover and you know, I suggest that you want to really come down and have a meaning which John and myself will be glad to do it, but this is a business that's going to be driven by continuous improvement and growth.
We don't have a business to run a cut to the bone, because we had a short fall in inventory management from a distribution.
Scott Graham - Bear Stearns & Co.
Fair enough, as I said Brain, at the top congratulation on a good quarter.
Brian D. Jellison - Chairman, President and Chief Executive Officer
Thanks.
Operator
We will take our next question from Michael Schneider with Robert W. Baird & Co.
Please go ahead.
Michael Schneider - Robert W. Baird
Hey guys, maybe we can just visit one quick time but the freight matching business is 2007 close in 2008 unfolds here, what is the benefit or I guess the hit now of the freight matching business growing within the best versus the tag business. It is clear the trucking industry is slow, as I understand that's actually good for the business.
So could you give us an update and kind of how the year end trend finished and then what the benefit here will be of margins and growth in 2008 and that growth?
Brian D. Jellison - Chairman, President and Chief Executive Officer
Well, what happens there it is kind of two folded in a way you are framing it correctly that, if you think about subscribers, if people are staying in the job it use to be that they would be shift out cyclically get into home building and what's happen in an home building drivers will stand more on line, so you don't have maybe as much attrition as you would normally have in terms of subscription fees. We also improved the offering we have which we charged more for certain types of things that people can get from the 360 Program.
So, the average subscription is not lower than it was before so that's helpful. We haven't really seen, you know, major fall out, we have been able to sustain and I think because of the coverage we have that kind of equal coverage on the internet for posting loads and reading the data at point...moment we don't have a floor, we are not really seeing if they grow up, we did have some growth in the fourth quarter in Canada so, we are not envisioning that being much of the drag on a weak performance.
Michael Schneider - Robert W. Baird
Okay then sticking with margins in that segment as you look back in 07 can you give us a sense what the international project having fully shift at least on the initial installation. Does that mean that the tag mix rose in 2008 again to the benefit of margins?
Michael Schneider - Robert W. Baird
Well, frankly it did better in '07 and we expect it because the customers adopted the tag in a higher rate I believe and perhaps people thought they would in country. So we more follow on tag orders in '07 than we expected, I think the margins in '08 will be at least as good as the margins were in 07, because we will be behind the initial install which has the lowest margin than anything.
So, we are feeling pretty good we had good deal or multiple protocol reader adoption and that's going to roll into 2008 we believe so, that will help us as well. So I don't see margin deterioration in the segment I think anything we would see some expansion of margins.
Operator
That will end our question-and-answer session for this call. We now return back to John Humphrey for any closing remarks.
John Humphrey - Vice President and Chief Financial Officer
Okay. Thank you Cynthia and thank you all for joining us today, and I know a few of you maybe had some follow up questions that we were not able to get to.
And we will work on the process to make sure that we allow a few more of those, sorry, about anyone who got cut-off. And I will be available this afternoon to handle any of the follow-up questions you might have.
Thanks everyone and we look forward to talking to you in about another nine weeks.
Operator
Ladies and gentlemen this will conclude Roper Industries fourth quarter year financial results conference call. We thank you for your participation and you may disconnect at this time.