Jason VanWees - Senior Vice President of Strategy, Mergers & Acquisitions and Member of Sarbanes-Oxley Disclosure Committee Robert Mehrabian - Chairman, Chief Executive Officer and President Susan L. Main - Chief Financial Officer, Senior Vice President and Member of Sarbanes-Oxley Disclosure Committee

Mark C. Jordan - Noble Financial Group, Inc., Research Division Kevin Ciabattoni - KeyBanc Capital Markets Inc., Research Division James Ricchiuti - Needham & Company, LLC, Research Division Howard A.

Rubel - Jefferies LLC, Research Division Stephen E. Levenson - Stifel, Nicolaus & Company, Incorporated, Research Division Chris Quilty - Raymond James & Associates, Inc., Research Division

Good morning, everyone. This is Jason VanWees, Senior Vice President, Strategy and M&A at Teledyne, and I'd like to welcome everyone to Teledyne's Second Quarter 2014 Earnings Release Conference Call.

We released our earnings earlier this morning before the market opened. Joining me today are Teledyne's Chairman, President and CEO, Robert Mehrabian; Senior Vice President and CFO, Sue Main; and Senior Vice President, General Counsel and Secretary, Melanie Cibik.

After remarks by Robert and Sue, we will ask for your questions. However, before we get started, our attorneys have reminded me to tell you that all forward-looking statements made this morning are subject to various risks, assumptions and caveats as noted in our earnings release and our periodic SEC filings, and of course, actual results may differ materially.

In order to avoid potential selective disclosures, this call is simultaneously being webcast, and a replay, both via webcast and dial in, will be available for approximately one month. Here is Robert.

Thank you, Jason, and good morning, everyone. Sales in the second quarter were $597.1 million.

GAAP earnings per share of $1.47 were an all-time record, increasing 30% compared to last year. I should note that earnings related by other pretax income of $8.2 million.

Nonetheless, even excluding this income, earnings increased substantially year-over-year. Our results demonstrate the successful transformation of Teledyne into a high-margin industrial technology company.

With record sales to the marine and offshore energy markets, instrumentation segment sales increased 7.2% in the quarter. In addition, greater sales of high-margin commercial avionics and machine-vision cameras helped offset expected decline in government sales in our digital imaging and different electronics businesses.

In the second quarter, sales to international and domestic commercial customers comprised approximately 76% of our total revenue. Furthermore, due to their high margins, this business has contributed over 80% of our profit.

Given the continued mix shift across Teledyne, as well as prior and ongoing cost reduction efforts, operating margin increased over 150 basis points to 12.4% and was a record for any quarters. While total revenue was relatively flat, organic growth in the U.S.

and international commercial markets and some small acquisitions more than offset a decline in sales to the U.S. government and an expected decline in sales resulting from the completion of a software-based radio program with a foreign government, which contributed over $20 million to each of the first and second quarter of 2013.

Once you note that, year-over-year comparisons in the third quarter of this year will be more normalized. In the commercial businesses, we achieved growth in all major global regions.

Growth in nondefense sales in the Americas was relatively broad-based but particularly strong in the avionics domain. Other than the foreign military program just mentioned, sales to Europe, the Middle East and Africa, collectively, increased, due in part to demand for our oil and gas instrumentation businesses.

Finally, Asia Pacific sales continued to grow due in large part to increased sales of machine-vision cameras. Orders were generally healthy across the company with a book-to-bill ratio of just over one.

I will now comment on our business segment, after which Sue Main will review some of the financials in more detail and provide an earning outlook for the third quarter and full year 2014. Turning to the instrumentation segment.

Second quarter sales increased 7.2% to $276.6 million with international sales representing over 55% of this revenue. Sales of marine instrumentation increased 9.9% with organic growth of 7.5%, primarily due to continued growth in sales of interconnect systems used in offshore energy production, as well as increased sales of autonomous underwater vehicles, or AUVs.

In the environmental domain, sales of process and air monitoring equipment declined slightly primarily due to tough comparisons. On the other hand, laboratory and field instrumentation sales increased over 20% from last year, largely due to acquisitions but also some organic growth.

This product also showed a substantial improvement from the first quarter of 2014. Sales of electronic test and measurement systems, comprised of Teledyne LeCroy and one other small product line formerly part of our environmental business, decreased about $2 million.

GAAP operating profit increased but margin was relatively flat in the instrumentation businesses, due in part to the impact of recent acquisitions and some decline within the environmental group, offset by margin improvements among marine instrumentation and electronic, test and measurement. Turning to digital imaging segment.

The segment provides a broad portfolio of visible light, laser-based, infrared, X-ray and ultraviolet sensors, cameras and software. Second quarter sales in digital imaging decreased slightly compared to last year.

Sales of sensors and cameras for commercial machine-vision applications increased nicely, driven by greater sales for semiconductors and electronics inspection. However, this gain was offset by lower sales of infrared imaging sensors and systems to the U.S.

government. GAAP segment operating profit increased substantially with margin about 370 basis points greater than last year due to our lower cost structure, coupled with a higher margin commercial sales mix.

Turning to the aerospace and defense electronics segment. Sales -- second quarter sales decreased 10.2% or $17.3 million.

However, I want to again emphasize that the first and second quarters of 2013 each included approximately $20 million in sales related to a specific software-based radio program, which is now complete. Besides this negative comparison, the segment performed well with growth in our commercial avionics and satellite communication businesses offsetting other decline.

Despite the reduction in overall sales, operating profit increased about 290 basis points primarily as a result of cost-reduction actions. Turning to engineered systems segment.

Second quarter revenue declined from last year as a result of lower government sales. Other orders continue to be strong with segment book-to-bill ratios of 1.12 for this quarter and 1.2 for the first half overall.

Given the healthy backlog, we expect that year-over-year growth in this segment in the second half of the 2014. Segment operating profit increased considerably despite lower sales with margin improvement of about 200 basis -- 230 basis points due to a change in GAAP pension expense in prior year to a modest pension income this year.

In conclusion, I am very pleased with the overall performance of our company, where a reduced cost structure and strategic actions taken since 2004 to minimize our pension have resulted in improved margin and profitability. Furthermore, sales from our commercial industrial businesses continue to grow across the company.

The performance of our marine businesses is very strong, and there have been solid gain in commercial machine vision, as well as avionics and satellite communication. Also, our earnings outlook, which Sue will discuss shortly, projects our 13th consecutive year of GAAP earnings growth.

Finally, free cash flow was almost $100 million during the first 6 months. Our acquisition pipeline is robust, and we will continue to balance capital deployment between acquisitions, internal investment and some shared repurchases.

I would now turn the call over to Sue Main.

Thank you, Robert, and good morning. I will first discuss some additional financials for the quarter not covered by Robert, and then I will discuss our third quarter and full year 2014 outlook.

Regarding earnings per share. While the second quarter of 2014 included a $0.6 million of net gain on legal settlements, the second quarter of 2013 included $0.9 million of discrete tax benefit.

Turning to cash flow. In the second quarter, cash flow from operating activities was $94 million compared with the cash flow of $112.8 million for the same period of 2013.

The lower cash provided by operating activities in the second quarter of 2014 primarily reflected the timing of accounts receivable collections, payments of accrued severance and facility consolidation costs and higher income tax payments, partially offset by the receipt of $10 million related to a legal settlement. Free cash flow, that is cash from operating activities less capital expenditures, was $85.1 million in the second quarter of 2014 compared with $92.8 million in 2013.

Given our strong cash flow and fully-funded pension, the company used $12 million in the second quarter of 2014 to repurchase approximately 126,000 shares of its common stock under its stock repurchase program authorized in October 2011. Capital expenditures were $8.9 million in the second quarter compared to $20 million for the same period of 2013.

Depreciation and amortization expense was $23.4 million in the quarter compared with $22.1 million last year. We ended the quarter with $405.8 million as net debt, that is $509.2 million of debt and capital leases less cash of $103.4 million for a net debt-to-capital ratio of 20%.

Turning to pension and stock option compensation expense. In the quarter, second quarter of 2014, gross GAAP pension income was $0.4 million compared with gross pension expense of $4.4 million in the same period of 2013.

Stock option compensation expense was $3.6 million in the second quarter of 2014 compared with $2.8 million in the second quarter of 2013. Finally, turning to our outlook.

Management currently believes that GAAP earnings per share from continuing operations in the third quarter of 2014 will be in the range of $1.26 to $1.30 per share. We expect full year 2014 earnings per share of approximately $5.31 to $5.35.

The 2014 full year effective tax rate is expected to be 28.7% excluding discrete items, such as nonrecurring tax benefits or adjustments. I will now pass the call back to Robert.

Thank you, Sue. We would like to take your questions now.

Operator, if you're ready to proceed with the questions and answers, please go ahead.

Robert, question relative to digital group. In mid-May, you changed management there, moved Rex up to Canada.

Could you -- 2 questions. What are his nearer-term sort of goals and objectives as you've given him reins of that organization?

Second question, longer term, being a year or 2 out, what should the digital group be able to generate from a normalized operating margin basis?

Mark, first, Rex -- let me start by saying Brian Doody, as you recall, voluntarily retired from the position, and Rex was kind enough to assume that leadership in mid-quarter. I think in the short term, he's focusing on improving a focus on the areas of improving our CMOS products, area scan products.

Now, of course, we have 2 major programs there that we are depending on for future growth. One of them is our X-ray businesses, and the second one is the uncooled infrared businesses that we're working on.

So those are his immediate focus points. In the longer term, I think that business has a potential to grow substantially, both organically and through some acquisitions.

And Rex, having had experience at the corporate level and running multiple segments, is well suited to lead that effort. In terms of the margins, I think margins in that business, normalized margins are going to be, near term, 10% or maybe a little higher, but in that range.

Margins have primarily improved this year versus last because of the cost reductions that were undertaken.

Do you have any expectations, if you will, to look out, say, 2 to 3 years, what type of operating margin potential might be at that organization?

Well, I -- we're aiming to -- first, I want to say that we do have about 300 basis points of intangibles in that business. But even with taking that into consideration, I think the margins in the imaging, in the DALSA imaging business, are going to be higher than our overall imaging business.

I'm going to say somewhere between 12% and 14% a couple of years out.

I wanted to start first in -- with the offshore business and instrumentation. I mean, it sounds like you guys are still seeing solid production activity.

Just curious what you're seeing there in terms of share gains and shift that content increases that you talked about a few months ago, and then whether there's -- you've seen any pickup on the exploration side of that business.

Let me take the second part of the question first. The exploration side in general has not been as strong as the production side.

While there is activity and some of our customers, our major customers, is still investing significantly in capital. We don't think the exploration side is going to grow substantially in the near term.

The production is a whole different story. There are activities all across the world, increased activities in production, especially in what we call very deepwaters, which would be over 5,000 feet.

And that benefits us not just in our interconnect systems because of increased number of trees that are being installed, but also because people are focusing on pushing more production processing to the seafloor versus bringing stuff up to the surface. And then finally, since a lot of this work is done in introducing the connectors, for example, and sensors is done with remotely operated vehicles, we also benefit there from -- or velocity measurement systems, underwater velocity measurement system for stability, as well as some of our other sensors that are using -- including inertial navigation system.

So overall, I think in the production side, we have robust orders. I think our order book to revenue is above 1.2 presently or over 1.2.

And some the projects are very large, and we're getting long-term programs that are worth over $25 million to us.

Okay, that's helpful. Next, I just want to look at the engineered systems.

I know missile defense was down in the quarter. I know it's not a huge piece of the overall business, but just wondering if that was more timing on the OSF project that might fluctuate from quarter-to-quarter, or should we continue to keep seeing that kind of tick down?

I think, Kevin, engineered systems should do pretty well in the second half of this year. I expect the revenues to be significantly up in the next 2 quarters.

There's some decline in OSF, but I would say the primary declines in that business have been in our system engineering and technical assistance program. Five years ago, 6 years ago, that business was about $107 million-a-year business.

This year, we're projecting about $7 million, so $100 million decrease. That sounds like a lot for us.

On the other hand, that's a very low-margin business, 2% to 3%, a lot of patch-through work. And so the loss -- it doesn't hurt profitability that much, but it is obviously reflected in the revenues.

But I think revenue in that overall in engineering systems is stabilized, and we have new manufacturing programs. We have the OSF you mentioned.

There's the shallow waters submerge vehicle program of--the $1 million program. There's the glider programs that they lead, and they have a robust manufacturing program.

So I think that business is going to be all right moving forward.

Okay. And then last one, just kind of a housekeeping question for me and then I'll jump back in queue.

What are -- what should we be looking at in terms of CapEx for the back half of the year? 2Q came in with the lowest we've seen in a long time, if not ever.

So just kind of curious to what the expectation there is going forward.

I'll let Sue answer that. Susan?

So we're looking at about $65 million for the year. It could be a little slightly less.

I had a question just on book-to-bill. Robert, I think you gave an overall book-to-bill for the company, and I think you've touched on some book-to-bills for a few of the segments.

Could you just provide the book-to-bill for instrumentation and digital imaging and aerospace and defense?

Yes. I think digital imaging is a little over 1.

I'm going to say 1 point -- maybe 5% over 1, 2% over 1. Instrumentation is about 1, with marine being -- the production side of marine being very strong and the exploration side being weak.

Test and measurement is just less than 1. Environmental is about 1.

So I'm going to say instrumentation, overall, is slightly above 1. Though where we have weakness is in the aerospace and defense area, especially in Q2, and that's because of the comp that I mentioned vis–à–vis that $20 million program.

But we think the second half of the year is going to be closer to 1. Engineered systems is about 1.12 in Q2, and the first 6 months is 1.2 book-to-bill ratio.

So we expect the improvements there. So overall, for the company, the first 6 months of the year, book-to-bill is about 1.04 or 5, about 4% or 5% over revenue.

Got it. And you touched on this -- I mean, it came up in some of the questions.

I just wanted to pursue it a little more. On the marine side, in terms of the opportunity on the production side of the business it seems like we're hearing more and more about ultra deepwater activities.

And to what extent is that a major focus of your R&D effort within that business? And when would we see that really begin to impact revenues?

The -- actually, Jim, it is already showing some impact on our revenues for 2 reasons. First, we are getting a significant amount of R&D funds from our customers, and some of it has to do with materials reliability, which becomes a serious issue at very deepwaters.

The second part is as you go deeper and as you have to then send power down deeper, you want to increase the voltage on your feedthroughs so that you don't have as much current going through and heating up the -- and losing the power basically. And so you need connectors on the seafloor that can withstand those high yield voltage.

So what happens there is that we are providing now ceramic feedthroughs, which are bringing us new resources and new customers. I think the feedback we're getting from our customers is that our research and development programs are significantly aiding our ability to get large programs from our customers.

And as I said, the book-to-bill in that area is over 1.2.

And so if we were to look out a few years from just this portion of the business, this type of ultra deepwater application, any sense as to the revenue opportunity for you?

Well, this year, if I look at the quarter, that business is up about, I'm going to say, 10%, 15%, maybe 20%. I don't know if we can keep that level up.

But I think in the short term, with the book-to-bill being what it is, we should be between 10% and 15%. So over the long term, we have very high aspirations for our oil and gas business.

By the way, I should also note that some of our land-based oil and gas business is also improving, where we supply cables and other products, connectors. And there's been more activity there, too.

So we're seeing some growth in that whole area. So I would say, overall, both in deepwater, as well as land-based, where our book to bill is now 1.1%, we see future growth.

Got it. And you characterized the acquisition pipeline as fairly robust.

I wonder if you could comment in -- maybe in broad terms in what areas. And will these last -- it seems like more of the recent acquisitions have been smaller-type acquisitions, bolt-on.

They've strengthened your positions in certain areas. I wonder if you could just elaborate on what you're seeing out there.

Jim, I think it's robust because we're looking at a lot of things. That's what I meant by -- whether we're a success will depend on, obviously, always on price and somebody's willingness to sell it at a reasonable price.

But having said that, the areas that we're looking at are, primarily at the present time, in digital imaging and in instrumentation. And the digital imaging can range from sensors, vision systems to software to x-rays.

Obviously, as you know, we're pretty excited about our highly sensitive and high-performance CMOS x-ray sensors. So that's one area we're looking at.

The other area in instrumentation, we're always, always looking at marine instrumentation. As you know, we have one business in there 10 years ago.

Now we have 14 businesses, 13 of them acquisition. So we're always looking in that area.

While prices are pretty high, our appetite to pay maybe a little more than we use to is improving.

Got it. And one final question if I may, and I'll jump back in the queue.

You may have given it, but did you say what the organic growth rate was in the quarter? And what did acquisitions add in the quarter in terms of revenues?

Organic growth in instrumentation was about 3%, and it changed from marine improving about 7.5% with some of the others decreasing. Digital imaging was relatively flat.

It was down a little bit. Where we have the most decrease in -- organically were in our aerospace and defense, primarily due to the program I mentioned, and engineered systems that we discussed.

So if we exclude the one program, the U.K. program, we had a slight increase in growth, I'd say, maybe 1%, 1.5%.

Moving forward, however, I think that, that will improve somewhat. The first half of the year, the overall revenue for the company was flat vis-à-vis the last year.

In the second half of the year, we expect in the third quarter to have maybe 6% or so growth and continue that into the fourth quarter. So that when we end the year, maybe we'll have 3% or so revenue growth, which would be pretty good because most of it would be organically, assuming that we don't buy anything in the meantime.

Robert, one simple housekeeping question for Sue maybe. The legal settlement, should we figure that was about $0.15?

Yes. Yes, well, in that range.

Okay, that's great. And then just to characterize your markets for a moment.

You did -- marine sounds, like on balance, a little bit better than GDP. Maybe some of the other instrumentation market's a little more challenging.

Could you talk about how you're seeing it? And what are you doing to try to do a little bit better?

Yes. In the -- I think in the marine, you've mentioned -- so I won't dwell on that.

I think in the test and measurement domain, we're seeing improvements in Asia and Europe. We're seeing weakness in the U.S.

So Tom Reslewic is looking at a whole range of options about the way we sell products and is also introducing some exciting new products, which should -- which are gaining some foothold. So I think the other piece of it is the environmental part of our program.

That should be okay because air quality monitoring and water quality monitoring programs are relatively strong. So we think that that's going to be around what the -- growth in a -- in those programs would be around GDP.

Now going to digital imaging, you've got to divide that into 2 pieces. There is the DALSA digital imaging, which is primarily commercial, and we have digital imaging here, as you're well aware, that's primarily government-oriented.

The DALSA digital imaging is growing in the single digit, lower single digit. Whereas we have some contraction in our government digital imaging business, even though both of those businesses improve profitability significantly in Q2.

Moving to the third segment, which would be the engineered systems segment. As I said, we expect revenues there to improve in the second half of the year significantly over the first half because of our book to bill being so healthy.

And then lastly, in our aerospace and defense programs, that difficult comp in Q1 and Q2, with the European program that we had, is going to go away. So we're going to have more normalized revenue there for -- as in terms of comparisons.

And I'd expect those to be above the GDP. So -- go ahead.

And then -- that's helpful. And then one last thing, the autonomous underwater UAVs.

You have, obviously, a great position in the market. How -- do you continue to see robust number of opportunities?

And could you discuss them a little bit, please?

Sure. Howard, you're very familiar with that area.

It is really growing very nicely for us. Of course, you know our glider program.

We have -- we've had a source program with The Navy for 150 gliders. We just won a second program, both for maintenance of what we produce but also new glider programs.

So -- and we also have glider programs are doing well in scientific missions across the world. And then if you move to our powered underwater vehicles, you may recall we bought a business, Gavia, a few years ago.

Before we bought them, I think over the many years, they only sold a couple of handful. We're selling a couple of handfuls a year, and those are very expensive vehicles.

And they're used for survey and other deepwater activities. We also have smaller vehicles, and we're also putting power on some of our gliders.

And we're always looking to see if we can add to that portfolio. We just invested in a small company that's developing a vehicle that -- they're a combination of a surface vehicle and a glider, and they've moved in our facilities.

So that -- overall, I think in the long term, that's our really good business for us. Because when you get the truck, which is the way we look at those things, then we add all of our sensors, we've got 10 businesses that make sensors and water measurement, current measurement devices and initial navigation systems and acoustic vision systems, so we can load all of those on our trucks, which is very -- obviously, very advantageous for us.

Just a question. Are the challenges of the environments where you've got sour gas impeding growth at all on the offshore market particularly?

Is that a problem that some of the other suppliers have? Or is that something that your stuff addresses?

I don't know, Steve. I can't answer that because I don't know much about that subject.

But I'll be happy to find out and get back to you.

Okay, that'd be great. Second, I saw recently that some of the vision systems are being used in food safety applications.

And I'm wondering if that's a new market, if you see the ability to penetrate that in a much greater number or if it's already beginning to mature and I'm just late on it. And what other measures do you see that might be new for the machine-vision equipment?

Yes, we've always had some cameras that are used in food processing. We also have that TapTone line, that you're familiar with, that uses various sensors.

For example, all those -- a lot of those coffee...

Teacup.

What do you call it?

Teacup.

Teacups are inspected using our system, millions and millions of them, obviously. We -- what we're trying to do is we're also trying to get some of the DALSA cameras combined with some of our other sensors in TapTone line.

So that's a nice area for us, and it's a growth area.

I wanted to follow up just real quickly on the engineered systems business. Can you give us, Robert, an update on where the business mix stands today in terms of, I guess, I'll call it, hardware versus services and where you expect that to go in the future?

Yes. I think, by and large, Chris, we're trying to move more into the hardware domain.

With the exception of NASA, that's a fairly stabilized for us. The hardware business is where the most improvement have occurred over the past few years.

Turbine engines has always been a good business, but it's going to be fairly stable where it is. And in our OSF program, our submerged vehicle program, I think there have been improvements.

I'd say hardware is going to end up being a little over 50%.

Okay. And are there -- I mean, you had a couple of big program wins, I think 3 program wins in the last 1.5 year or so.

Are there any other big whale opportunities in the pipeline?

Yes, there are. But the problem with that is you never know if you're going to get them.

The ones that we've got, which were very interesting, were obviously subject to simulation framework, which is OSF, which significant goes out to 2018. The combat vehicle, submersible combat vehicle, you're very familiar with that.

We got more recently. We had the launch vehicle stage adapter -- the NASA program for $60 million, and we have engineering solutions and prototyping program.

And we have high aspirations for our space imaging, obviously, on the International Space Station. So we're always bidding on big programs.

But right now, we have a fairly nice portfolio of long-term programs in that business that should help us going forward.

Got you. And the digital imaging business, have we hit the point now with the declines in the defense programs where we'll -- it should flatten out?

Or are there further declines, you think, in those programs that you still have to work through?

I think digital imaging is going to be relatively flat when you combine our DALSA businesses with our government businesses. On the government businesses, while some of the defense is challenged, we do have a lot of programs in space imaging, from both ground-based and space-based imaging.

For example, the European programming that we have, as well as the James Webb Telescope, which we actually just delivered our products there. So I think -- and then we're getting into some classified programs in digital imaging, which should help us in the long term.

So I think in the short term, digital imaging is going to be relatively flat. In the long term, I think DALSA is going to grow significantly.

So if I'm reading you correct, there's probably still some declines in the government that are offsetting your GDP growth, plus in the DALSA?

That's fair, but I think some of that is behind us, fortunately, I hope. We're seeing, for example, in some other places, Chris, like in -- we haven't seen traveling wave tube orders for a long time.

We're starting to get some orders now, some repairs and some new orders. So we think some of those declines are behind us.

Okay. And with regard to the M&A strategy, is there any emphasis on expanding the breadth of your product portfolio versus vertical integration to drive down costs and supply chain issues?

Or is it just opportunistic?

Well, it's both. We -- I'm a little skeptical about stepping too far from our core competence, because we always worry about what would we bring other than money and maybe -- and management fee[ph].

You got money.

But there are things that are exciting. And some of those come back to our research lab.

Let me give you one example of an area that we think has potential, if we could find something. We have in our laboratories here, we've developed some very interesting filtration system, quoted filters that are very effective, for example, in cleaning up extremely dirty water, such as the water that you get in the frac-ing operation.

And as you well know, that water, in order to reuse it, you have to filter it and then you take the brine because they have much as 30%, 40%, 50%, then you got to ship it offsite. If you can do it more efficiently, then your contrary extraction [ph].

We do have some technology. Then for the first time, we might look at potential acquisitions that would be related to our technologies than just because we have a business.

If we have an exciting technology and we can find a business that we can hoist that into, that might be attractive for us.

Got you. And final question here, I guess following up on that.

When you look at R&D -- internal R&D spending, are there any unusual trends that have been either up or down across the product portfolio? Or any changes anticipated?

Fundamentally not, with the only exception -- as you know in our scientific laboratories here, all the profit is reinvested in the R&D. So part of the reason that when we look at the -- our imaging businesses, about 20% of the profit in that business is sunk back into supporting our program.

So R&D is gone -- overall, I think it's going to be relatively flat.

I was actually going to touch on the defense portion of digital imaging, but Chris hit it, so I'm all good.

Thank you, operator. I will ask now Jason to conclude the conference call.

Thank you, Robert, and again, thank you, everyone, for joining us this morning. And, of course, if you have follow-up questions, please feel free to call me at the number on the earnings release and all news release are available on our website as well.

Operator, if you could conclude the conference call and provide the replay details, we would appreciate it. Thank you.