Becton, Dickinson and Company (BDX) Q4 2011 Earnings Report, Transcript and Summary

William A. Kozy - Executive Vice President David V. Elkins - Chief Financial Officer and Executive Vice President Monique Dolecki - William E. Rhodes - Vincent A. Forlenza - Chief Executive Officer, President and Director Gary M. Cohen - Executive Vice President Tom Polen - President

Robert M. Goldman - CL King & Associates, Inc. Bill Bonello - RBC Capital Markets, LLC, Research Division Amit Bhalla - Citigroup Inc, Research Division Jonathan P. Groberg - Macquarie Research Miroslava Minkova - Leerink Swann LLC, Research Division Nandita Koshal - Barclays Capital, Research Division David H. Roman - Goldman Sachs Group Inc., Research Division Doug Schenkel - Cowen and Company, LLC, Research Division Peter Lawson - Mizuho Securities USA Inc., Research Division Jeffrey Frelick - Canaccord Genuity, Research Division Jon Davis Wood - Jefferies & Company, Inc., Research Division Kristen M. Stewart - Deutsche Bank AG, Research Division Jonathan J. Palmer - Credit Agricole Securities (USA) Inc., Research Division Sara Michelmore - Brean Murray, Carret & Co., LLC, Research Division David R. Lewis - Morgan Stanley, Research Division Kimberly Weeks Gailun - JP Morgan Chase & Co, Research Division William R. Quirk - Piper Jaffray Companies, Research Division Pete Vitale

Hello, and welcome to BD's Fourth Fiscal Quarter 2011 Earnings Call. At the request of BD, today's call is being recorded. It will be available for replay through Wednesday, November 9, 2011, on the Investors page of the bd.com website or by phone at (855) 859-2056 for domestic calls and area code (404) 537-3406 for international calls using conference ID 16826583. [Operator Instructions] Beginning today's call is Ms. Monique Dolecki. Ms. Dolecki, you may begin.

Thank you, Jackie. Good morning, everyone, and thank you for joining us to review our fourth fiscal quarter and year end results. As we referenced in our press release, we are presenting a set of slides to accompany our remarks on this call. The slide presentation is posted on the Investor Relations page of our website at bd.com. During today's call, we will make forward-looking statements, and it is possible that actual results could differ from our expectations. Factors that could cause such differences appear in our fourth fiscal quarter press release and in the MD&A sections of our recent SEC filings. We will also discuss some non-GAAP financial measures with respect to our performance. A reconciliation to GAAP measures can be found in our press release and its related financial schedules and in the slides. A copy of the release, including the financial schedule, is posted on the bd.com website. Leading the call this morning is Vince Forlenza, Chief Executive Officer and President. Also joining us are David Elkins, Executive Vice President and Chief Financial Officer; BD Executive Vice Presidents, Gary Cohen and Bill Kozy; as well as Tom Polen President of Diagnostic Systems. At this time, we would also like to announce Alberto Mas, the new President of BD Biosciences. Alberto will have responsibility for the cell analysis and labware units. Alberto has spent the past 6 years as the President of Medical Surgical Systems. His 19-year career at BD includes functional and general management assignments in Europe and the U.S., including prior Finance and General Manager roles in Discovery Labware and 4 years as Vice President and General Manager for BD Biosciences in Europe. Bill Rhodes, the previous President of BD Biosciences, will assume the role of Senior Vice President, Corporate Strategy and Development, reporting to David Elkins. Bill is especially qualified for this role. With more than 25 years of new business development and start-up company experience, he combines a deep understanding of external market opportunities with a true general management perspective. Bill is participating on the call today. We are extremely pleased to have both of these leaders in their new roles and we believe they will leverage their diverse experience to lead the company through its next phase of growth. It is now my pleasure to turn the call over to Vince.

Thank you, Monique, and good morning, everyone. Today, I'll begin with a brief overview of BD's performance for the full fiscal year 2011, then I'll spent some time highlighting the guidance for our fiscal year 2012. After that, David will provide a financial review of the total company and segment performance, as well as provide you with key components of our 2012 guidance. I'll spend the balance of our time discussing our performance in emerging markets and the progress we have made in our product pipeline. After that, we'll open the call to questions. As we stated in the press release, we had a solid finish to the fiscal year. Revenue growth was 4.9%, currency-neutral when excluding the difficult comparisons from the pandemic flu, as well as stimulus and supplemental spending in fiscal year 2010. We are pleased with our continued strong growth in safety sales and in emerging markets. We continue to make progress with our operational excellence programs. This year, we also successfully completed 2 acquisitions, Accuri Cytometers and Carmel Pharma. We are pleased with our progress to date on these acquisitions and we will continue to look for external opportunities that are aligned with BD's capabilities. We continue to invest in R&D and our key product launches remained on track in each of our 3 segments contributed to the company's pipeline progress. We now have the most robust pipeline in the company's history. We continue to make the company more effective, efficient and we will continue to deliver superior and safer healthcare products. I would like to discuss the things we contemplated when forecasting fiscal year 2012. As our industry remains challenged, we continue to see economic pressures on healthcare utilization in the U.S. and Western Europe. Additionally, we anticipate lower research funding and expect a downward trend on pricing to continue in fiscal year 2012. Despite these macroeconomic challenges, we will increase our investments in high-growth opportunities to ensure the long-term health of the company. Given the aforementioned factors and our commitment to deliver on our guidance, we have taken a prudent approach to our outlook for next year. We are expanding the range of our revenue growth and expect it to be between 2% to 4% on a currency-neutral basis. We expect EPS growth to be between 4% to 6%. We believe these projections incorporate additional flexibility for unanticipated external conditions. On Slide 5, you will see the guidance for fiscal year '12 on a reported- and currency-neutral basis. This year, our revenue growth was 2.9% currency-neutral. If you exclude the impact of the pandemic flu and stimulus and supplemental sales from fiscal year 2010, revenue growth was 4.9%. EPS growth was 8.1% currency-neutral. As I just mentioned, we are expecting revenue growth to be between 2% and 4% and EPS growth of 6% currency-neutral. David will discuss key components of our P&L for fiscal year 2012 later in his remarks. On Slide 6, I will walk you through our guidance by segment. For the Medical segment, we are anticipating currency-neutral growth of about 1% to 3%. Our outlook reflects nonrecurring items in the Pharmaceutical Systems business that took place in fiscal year 2011. Additionally, we anticipate continued challenging macroeconomic conditions that are adversely impacting end-user demand and causing pricing pressure in developed markets. In the Diagnostics segment, we anticipate currency-neutral growth of 2% to 4%. Similar to our Medical segment, challenging macroeconomic conditions are continued -- and continued downward pricing trends are impacting the segment, primarily in Preanalytical Systems. However, Diagnostic Systems is benefiting from a series of product launches. We expect Biosciences currency-neutral growth to be between 4% and 6%. This lower growth rate is due in part to uncertainty in the research funding environment worldwide, which impacts both our Cell Analysis and Discovery Labware units. Additionally, we have taken steps to eliminate products from the Discovery Labware portfolio that were low volume, low margin and low contributors to growth. And now, I'll turn the call over to David.

Thank you, Vince, and good morning, everyone. Moving to Slide 8, I'd like to briefly highlight some of our fourth quarter results, which were mostly in line with the company's expectation. Revenue came in about 4% currency-neutral. We experienced strong growth both in emerging markets, as well as international safety sales. We also delivered on our EPS guidance coming in at $1.39 for the quarter. On Slide 9, you will see revenues were approximately $2.1 billion in the fourth quarter. Adjusted EPS growth grew about 8% to $1.39 currency-neutral. Our total year revenues of $7.8 billion reflect revenue growth of 2.9% and adjusted EPS growth of about 8% currency-neutral. Now let's move on to Slide 10, where we review our revenue growth by segment, which I will speak to on a currency-neutral basis. BD Medical fourth quarter revenues increased 3.8%. The growth in this segment was mainly driven by the Diabetes Care business with continued strong sales of pen needles and solid growth in Pharmaceutical Systems unit. For the total year, the Medical segment grew 2.3%. When excluding the impact of pandemic flu-related sales in fiscal year 2010, growth in the segment was 4.5%. Revenues in the BD Diagnostics segment grew 3.8%. Revenues reflected solid growth in both Women's Health and Cancer and the infectious disease product offerings within the Diagnostic Systems unit. For the total year, the Diagnostics segment grew 3.9%. When excluding the impact of pandemic flu-related sales in fiscal year 2010, growth in the segment was 4.5%. BD Biosciences revenue growth was 4.7%, driven by strong instrument reagent sales in our Cell Analysis unit. For the total year, the Biosciences segment grew 3.2%. Excluding the impact of sales related to supplemental and stimulus spending in Japan and in the U.S. in fiscal year 2010, the Biosciences business grew 6.8%. Now turning to Slide 11, we'll look at our geographic results. In the fourth quarter, BD's U.S. revenues increased about 1%. U.S. Medical revenues increased 1% year-over-year. U.S. sales in Diagnostics products increased almost 2%. Biosciences revenues in the U.S. increased about 0.5%, with growth in Cell Analysis business unit being offset by weakness in core consumables and our Discovery Labware business. International revenues grew about 6% on a currency-neutral basis. Growth was driven by continued strong international safety sales, and growth in Asia Pacific and Latin America. Medical and Diagnostics contributed about 6%. The Biosciences segment grew 7.3%. For the total year, U.S. revenues grew 2%, with Medical increasing 1.8%, Diagnostics increasing 2.6% and Biosciences growing 1.9%. International revenues grew 3.6% on a currency-neutral basis. When excluding the impact of pandemic flu-related sales of fiscal year 2010, international revenue overall grew about 5%. Moving to global safety on Slide 12. Reported sales grew 12.3% in the quarter to $498 million. On a currency-neutral basis, safety growth was about 8%. This was comprised of 2% growth rate in U.S. and an international growth rate of 18.5%. For the total year, safety growth was 5.4% on a currency-neutral basis, which is a combination of 0.7% growth rate in the U.S. and an international growth rate of 13.6% on a currency-neutral basis. In the Medical segment, the U.S. growth rate is being driven by Nexiva and our new product, PhaSeal. This product is from our Carmel acquisition what expanded our safety product offering. International safety is driven by Infusion Therapy products. In the Diagnostics segment, U.S. growth rate is being driven by the Push Button Blood Collection Set and the international growth rate is being driven by a range of safety products. Additionally, safety growth was particularly strong in emerging markets coming in at 24.2%. On Slide 13, we review our revenue in the fourth quarter in which our reported growth rate was 9.5%. Currency contributed about 6% to the growth and performance contributed 4%. The loss due to the hedge gain from fiscal year 2010, not recurring in fiscal year 2011. Moving to Slide 14, looking at our gross margin, we experienced a negative 70 basis points impact from currency and hedge gain not repeating. From a performance standpoint, positive operating performance of 90 points was offset by higher raw material costs and pension expenses. Slide 15 recaps the fourth quarter income statement and highlights our foreign currency neutral results. As discussed earlier, fourth quarter revenue was 4% and gross profit also grew about 4%. Moving down the income statement line, SSG&A increased 5.6%, primarily due to higher acquisition-related expenses, higher legal costs and increased shipping fees related to higher fuel costs. As we discussed in previous calls, another headwind is our EVEREST/SAP implementation costs. Partially offsetting these items is a decrease in the deferred compensation expense, which is offset by a loss on the interest income line. R&D decreased 7.2%, which is in line with our expectations as we accelerate spending in the first half of the year. As a result of the items I just mentioned, our operating income increased 5.7% and earnings per share increased about 8% in the quarter. Slide 16 recaps the total year income statement and highlights our foreign currency neutral results. Revenue growth was about 2.9% and gross profit growth was 3.2% due to increased productivity and ReLoCo, which more than offset raw materials and pension costs for the full year. Moving down the income statement, SSG&A increased about 5%, with the main drivers being increased investments in emerging markets, higher pension and EVEREST costs. Acquisition-related expenses and a provision for European receivable also contributed to the increase. These increases were partially offset through efficiencies in our G&A infrastructure and other cost savings programs. For the total year, R&D increased 7.7% currency-neutral, which is in line with our expectations. We increased R&D as a percent of sales by 20 basis points as we invested in new products and platforms. As a result, operating income increased 0.2%, which reflects lower revenues and increased SSG&A and R&D expenses. EPS growth is 8% currency-neutral. On Slide 17, I'd like to walk you through our outlook for next year. As Vince mentioned earlier, we expect revenues to increase about 2.4% on a currency-neutral basis. We are considering several factors with this outlook. First, we expect to see a downward pricing trend continuing through the full fiscal year 2012. Although our price decline was just under 100 basis points for the total year, we did see an increase in the fourth quarter. We expect pricing erosion to be slightly above 100 basis points for fiscal year '12. Second, healthcare utilization in the U.S. and Western Europe remains constrained, and we expect these macroeconomic conditions to continue in the near future. Third, we are seeing an increase in raw material costs, which will impact our gross profit margin. Additionally, we will be making significant investments in SSG&A, increased sales and marketing resources in emerging and other high-growth markets, accelerated acquisition expenses and increased SAP implementation costs. Due to these items, some of which are one-time in nature, we're expecting EPS to increase 4% to 6% currency-neutral in fiscal year 2012. Moving to Slide 18, I'd like to walk you through our P&L for fiscal year 2012. For the year, we're expecting revenues of about $8 billion. We expect our gross profit margin to be approximately 51.3% to 51.5%, a decrease of about 70 to 90 basis points. This reflects the anticipated negative effects of higher raw material costs, the acquisition-related expenses and software expenses resulting from our Biosciences product launches. Partially offsetting this is a benefit from our ReLoCo program and positive productivity and mix. SSG&A is expected to be approximately 23.6% to 23.8%. This reflects increased investment in emerging markets, selling and infrastructure and acquisition costs, primarily related to the rollout of Carmel and Accuri. Also included are the EVEREST/SAP implementation costs, which are slightly offset by reductions in our G&A spending, driven by the functional transformation programs. We plan to increase R&D about 6% by investing in new product platforms and funding even further increases through an R&D re-prioritization and reductions in infrastructure. Operating income as a result is expected to be approximately 21.5% to 21.7%. Our cash flow will remain strong, with our operating cash expected to be $1.7 billion in fiscal year 2012. We also plan to repurchase $1.5 billion in shares. The majority of which will be funded through a future debt offering. Capital expenditures remain in line with our 2011 spending at approximately $500 million to $525 million. For our bottom line, we expect reported EPS to be between $5.75 and $5.85. I'd also like to highlight that we anticipate the first quarter fiscal year 2012 to be below our guided growth rates for the year. We expect revenue growth rate of about 1% to 2% on a currency-neutral basis, which reflects a tough comparison to the first quarter of fiscal year 2011, primarily related to Pharmaceutical Systems unit where there is an inventory build due to the launch of low molecular weight heparin and an increase sampling of certain biological products. Additionally, we expect continued downward pricing trends in our Medical Surgical Systems unit. We expect EPS therefore to be between $1.13 and $1.17, which also reflects the higher tax rate compared to the prior year, which benefited from discrete items. Before I turn the call back over to Vince, I would just like to highlight our solid finish to the year in a very challenging environment. Emerging markets and international safety continue to deliver strong double-digit growth, and we are still investing in key R&D projects and in new programs to drive operational efficiencies. We are also seeking to maximize our capital structure and in doing so, return more cash to our shareholders. Now I'd like to turn the call back over to Vince.

Thank you, David. Moving on to Slide 21, I would like to highlight our emerging market results. We continue to see strong growth in emerging markets, which accounted for approximately 21% of our total revenues in the fourth quarter. Emerging market revenues grew about 11% in total over the prior year, accounting for 2/3 of total BD dollar growth on a currency-neutral basis. We continue to see double-digit growth in the number of key markets, with China growing at about 26%. We were very pleased with safety revenue growth in emerging markets, which was up about 24% over the prior year. We will continue to invest in emerging markets in the areas of geographic expansion, market development, local manufacturing and R&D to build a long-term business model for sustained growth. On Slide 22, I'd like to provide an update of our key product initiatives, starting with BD Medical. Earlier in the year, we announced the launches of our BD ecoFinity Life Cycle Solution program and the first products from our ReKindle program. In the fourth quarter, we launched an extension of our flagship IV Catheter product, Insyte Autoguard with a blood control feature. We will also launch Nexiva with a diffusion tip in the first quarter of fiscal year 2012. In our Diabetes Care business, we just launched a next-generation safety pen needle, the AutoShield Duo, and we plan to launch other innovative products throughout the year. On Slide 23, I would like to walk through some of the key initiatives in our Diagnostics segment. In the third quarter of this fiscal year, we launched a new automated microbiology plate streaker called the BD Innova. We also launched the 6-color BD MAX as an open system in May. We have received good feedback from our customers and we are pleased with the progress we have made in these areas. As I mentioned in previous conference calls, in fiscal year 2012, you can expect the launch of the BD MAX, MRSA and C. difficile assays midyear in the EU. The U.S. launch will be toward the end of the year. We are continuing to invest in the BD Viper XTR with fully automated specimen processing. In the fourth quarter of fiscal year 2012, we will be launching the Trichomonas assay on the BD Viper. At the end of fiscal year 2013, we will be launching the Viper LT, our next-generation mid-volume Viper platform. In fiscal year 2013, we expect to launch our molecular Pap test the BD SurePath Plus, which is in the data analysis phase of the clinical trial. On Slide 24, we will review the product launches of our Biosciences segment. We announced our BD Recharge media supplement for bio production earlier this year, along with our 8-color research analyzer, the FACSVerse. Our desktop sorter, the FACSJazz was released as a limited launch last quarter and will be launched worldwide by the second quarter of this fiscal year. We plan to launch our new cell culture medium, Mosaic, in the first quarter of fiscal year 2012. As we look to fiscal years 2012 and 2013, we plan to launch 2 new analyzers for CD4 testing. One is meant for mid- and smaller-volume laboratories in both the emerging markets and the developing world, while the other is a more portable point-of-care instrument targeted towards rural clinics in the developing world. Turning to Slide 25. As I outlined in my initial comments, BD is continuously focused on operational excellence programs. Today, I'm pleased to update you on ReLoCo and provide you with an overview on ReLoCo II. The ReLoCo I project has been successfully implemented, achieving break-even status in fiscal year 2011. And as I mentioned on the last conference call, we'll yield savings of approximately $50 million to $60 million by fiscal year 2013. The ReLoCo II initiative is something we are very excited about. Essentially, we have expanded ReLoCo I and we are using the same principles, knowledge and skills gained and applying them more broadly. While ReLoCo I was a program that was only in our Medical Surgical Systems unit, the ReLoCo II program encompasses all of the BD Medical segment, as well as Diagnostic Systems and some elements of the BD supply chain. We have identified in our implementing projects that we expect to yield annualized net savings of $60 million to $70 million per year by the end of fiscal year 2014. On Slide 26, before we open the call to questions, I would just like to reiterate the key messages I would like for you to take away from our discussion today. First, we're pleased with our performance and believe our results for the year were solid despite the headwinds facing our industry. Second, we are going to continue to invest in the business to drive both top line and bottom line growth. We will make focused investments in R&D and in emerging markets and continue to look for acquisition opportunities that align with BD's strategies and capabilities. The successful completion of the Accuri and Carmel acquisitions are 2 strong examples of this. And third, we continue to focus on operational excellence programs across the P&L to maintain our strong cost position. We believe programs such as ReLoCo and ReLoCo II will deliver significant savings in the long run. For more than a decade, BD has been a company that investors could rely on for consistent predictable results. More recently, we, and other companies in our industry, have faced a more challenging and less predictable external environment. We anticipate this environment will continue for the foreseeable future at a minimum through the next fiscal year. Recognizing the importance of delivering on our commitment during these challenging economic times, we have taken steps to achieve higher predictability in a less predictable environment. As I mentioned earlier, this is reflected in our guidance for fiscal year 2012. We have incorporated additional flexibility for unanticipated external conditions, while preserving the company's key investments in R&D, emerging markets and operating efficiency programs. We remain confident that the programs we have in place are a strong foundation for future growth. Thank you. We will now open the call to questions.

[Operator Instructions] Your first question comes from the line of Jon Wood with Jefferies. Jon Davis Wood - Jefferies & Company, Inc., Research Division: Just some perspective on the top line next year. If I look at kind of your underlying -- BD's underlying trajectory the last 3 years, you've been around the 5% level, 4.5% in '09. So even if I take another point or so of price off looking at that '09 figure, you're still seem to be guiding below your '09 experience in '12. Is that an accurate representation? And if conditions were to just stay as they are right now kind of as you exited the fourth quarter, do you foresee that your numbers are too low or in line with where they should be?

Jon, I do think from -- if you look at where we finished the fourth quarter and then look forward, the story is really around what's happening in the U.S. marketplace. And there's a couple of factors that we saw in the fourth quarter that I'll mention. Number one is utilization in the hospital segment and lower acuity. And we saw that also reflected when we step back and look more broadly at the cost trends in the insurance industry where their cost ratios were going down. On the physician office side, we saw less physician visits, and we don't know exactly whether that was seasonal and how much of that will bounce back. We think September was maybe a little bit better. So from an environmental standpoint, our concern on the clinical market side was that we were seeing some weakening, number one. Number two, on the research product side, we're also concerned about funding. And if you look at Biosciences growth in the fourth quarter in the U.S., we saw some lightness there as well. As you move down in the range, clearly, the direction you're going with the environment would have to be worse to go down further in the range, that's true. So the low end of our range would certainly be implying further deterioration in the environment. Now I'd like to point out one other thing, which changes from last year to this year. And David mentioned in his remarks, and that's really Pharm Systems. In Pharm Systems in the U.S. last year benefited from the launch of low-weight molecular heparin and some sampling programs with some biotech drugs. They're not going to repeat in fiscal year '12, and that's cutting the growth rate for Pharm System substantially. So that's kind of the picture. International looks good, the emerging market piece looks good. So yes, if you look at our range, the environmental would have to get worse to get down in the lower end of the range.

Your next question comes from the line of Rick Wise with Leerink Swann.

It's Miroslava for Rick today. Let me just start by asking about the gross margin. You highlighted some of the factors that are impacting, and I appreciate the increased cost pressures from raw materials. But maybe if you could help us understand what's driving such a reduction from fiscal '11 to fiscal '12?

Sure. We'll break that out for you. But you're right, the starting point is the raw material costs, which is up about $25 million year-on-year. David's got a break-out that he can walk you through.

The main things that are driving the year-over-year is, first and foremost, is that as we look -- as we talked about earlier, software amortization that we have with the launches of the Biosciences. The other big driver there is the raw material costs. We're seeing raw material price increases year-over-year. And it's not just resins, we're seeing that within paper, glass, steel and rubber. And also, the other thing driving margins, as Vince had mentioned, is as you have increased price, all of that price pressure falls through in your gross margin. Lastly, the one other major item is with the 2 acquisitions that we've had, you have integration costs that go through your gross margin line and you also have to step up in your inventories that you got to do as part of your acquisition accounting. So when you put all of those things together, there are some one-off items that are hitting us next year that we don't see as longer term trends. They're causing the margins to be slightly lower next year than what they are this year.

And just to further explain, on the software, what we're talking about there is we have always capitalized software in the Biosciences business. We've launched a new software platform to accompany these product launches. And as we do that, we start to amortize the software, so that's not a thing that continues to increase. This is a program you have once every 5 to 7 years, something along those lines, but that is impacting fiscal year '12.

Great. I appreciate the color. So some temporary items there as well. And maybe if you could just clarify real quick for us whether the buyback is included in your EPS guidance or is it not?

It is.

Your next question comes from the line of David Roman with Goldman Sachs.

I wanted just to go into a little bit more detail with respect to the $1.5 billion share repurchase. I think a year ago, you'd committed to sort of $650 million--the stock's obviously below where it was at that time. Maybe you can sort of remind us how you're thinking about use of capital. Why you wouldn't be looking to deploy these -- to deploy your resources to a higher growth external asset, and why, at this point, you think buying back stock is the right move?

Well, we do believe that acquisitions will be a part of our strategy just -- as we just did Accuri, just as -- we just did Carmel Pharma. So, you're making a good point there. And as we identify strong targets but maintain discipline, we'll look to do that. At this point in time, having done that analysis, we think $1.5 billion is a prudent use of our capital. So maybe, David, you want to make any other comments on the share buyback.

I think definitely, we're looking at acquisitions out there as Vince talked about on last call. We're building our capabilities and our business development area, and that's one of the reasons that we got Bill Rhodes going into that area. But also there, we're going to apply the same financial discipline we always provided and went through when we looked at acquisitions. So when we look at our capital structure, we think there's a way to continue to optimize the capital structure given where interest rates are. We think returning the cash to our shareholders is the right thing to do if the acquisitions don't materialize.

And Jon (sic) [David], we think our share buyback program gives us the flexibility that if we identify something that we want to go after, we can flex it, if we can flex.

And maybe as a follow-up to that, on the savings from ReLoCo, if you look at the dollar that you've quoted, can you maybe just clarify whether those are gross or net savings. And as you think about reinvestment, how much are you at a point right now where you're basically running from your developed markets for cash and redeploying a lot of those resources into investments in either emerging markets or some of the growth area at therapeutic categories that you serve?

So Jon (sic) [David], it's a great question, and I'm going to ask that we maintain just the rule on one question. But certainly, we'll answer your question. As we approach this -- I'm sorry, David. As we approach this year, we did look at the infrastructures in the developed world versus the developing world, and we made some very tough choices on those infrastructures in the developed world and did redeploy resources from the developed world into the developing world. By the way, that's a process that has been going on before this year. And so the answer to that question is, yes, we're being very disciplined around there. But we also have a whole series of new products. So we have to make sure that in a targeted way, so as we launch these new products that we have the resources in the developed world as well. So it's not just to run the developed world for cash. It's also have to maintain the ability to sell value in the developed world. But there was some significant shifting in resources.

Your next question comes from the line of Kristen Stewart with Deutsche Bank. Her question has been withdrawn. Your next question comes from the line of Mike Weinstein with JPMorgan. Kimberly Weeks Gailun - JP Morgan Chase & Co, Research Division: It's Kim for Mike. So just a couple of quick questions. I wanted to start on the Medical pricing commentary, and maybe you could just give us some color on where you're seeing it the most within Medical and how you're thinking about that going forward? I think you said, you're expecting a little bit over 100 basis points of pricing pressure next year, but kind of what's the visibility into that? And are you guys still targeting probably on a longer-term basis at this point that 50 basis points of operating margin expansion?

The answer to the second question you asked is yes. And that's why we talked about ReLoCo I then going to ReLoCo II. The savings programs that we have in G&A, we're just at the point where those service centers are up and running, and so we expect benefits from them in the future. And quite frankly, in this environment, we'll look for other opportunities to become more efficient. But those are good platforms to build from. I'll let Bill answer the question around pricing in Medical. Bill Kozy.

Sure. The way we're looking at our prices on a geographic basis and the pressure is pretty much coming from Europe and the U.S., not a surprise. Both are equally impacting our overall profitability as we look at each of the individual businesses. The European price pressure is more pervasive across all 3 of the units at this point in time. Most of our price pressure in the U.S. at this stage has come in our Medical Surgical business and you know the traditional product categories you'd expect of Hypodermic and IV Catheter.

Yes. And then to the first part of your question, the ReLoCo numbers are net. Kimberly Weeks Gailun - JP Morgan Chase & Co, Research Division: Okay, great. And then just one quick follow-up on the pension expense, what are you guys assuming in terms of the headwind from pension costs in '12 versus '11?

So we are assuming flat pension costs. There is a headwind from the discount rate going down, but we're looking at strategies around contribution and some other things to hold the line of pensions.

Your next question comes from the line of David Lewis with Morgan Stanley.

Vince, just wanted to take a step back here for a second. I mean, one thing BD has done a very nice job of is talking about these pressures. You've talked about multiple initiatives to get ahead of these pressures, but it does seem in last 3 to 4 months, business fundamentals have changed. And I'm just sort of wondering is this more that ReLoCo initiatives that you thought would manifest in '12 and '13 are just not manifesting fast enough, or in the last 3 to 4 months, the pricing in broader environment has just gotten that much worse? Just help us understand. You've been getting ready for these things. It looks like the environment's gotten ahead of you again, and I'm just trying to understand what's changed last 3 to 4 months and give us a flavor of ReLoCo plus the environment.

Sure. So ReLoCo is on track. It's where we expected it to be. ReLoCo I, from an overall standpoint, I think we accelerated our work on ReLoCo II as to your point, the environment got worse. So we were being proactive. But in the fourth quarter, we saw the increase in raw material costs and that was more than we were expecting. On the pricing side, from an environmental standpoint, the pricing that we have in this plan, there is 2 pieces to it. One is driven by -- and this is really on the device side of the business, kind of the environmental pressures that we've been talking about and describing on the call. In one area on the device side, one particular product line, which less than 4% of the company sales, it was more driven by a competitive situation that was kind of a unique situation with excess capacity in that product line, not at BD but on the part of the competitor, and that was a much more significant event than we were expecting. So I see that as kind of a one-off. So you take half of that pricing impact that we're talking about, that's the kind of one-off event, you need competitive situation, the rest is kind of the environmental impacts. That's how we see it. But ReLoCo is on track. And so we we're redoubling our efforts there. David's going to add something else.

What I would say is since July, the 2 biggest things that are different is, one, the acquisitions as I talked about, there's the integration costs that are in there that really hit next year, as well as the step-up on the inventories that we're selling. And then as Vince talked about, the raw material costs continued and we're assuming that those price increases within raw materials are going to continue into next year. So those are the 2 biggest things that are causing. We don't see those things continuing beyond next year.

Your next question comes from the line of Jon Groberg with Macquarie Capital.

Maybe just one clarification and then another question. But Vince, from a guidance perspective, I guess I'm just trying to understand a little bit, are you -- the way you think about your guidance is the midpoint of your guidance kind of what you expect for next year, or from your comments, I'm just trying to understand if you think you're giving very conservative guidance?

Well, the way I think you should think about the guidance is we've given you a broader range to start the year. We would expect as we get more clarity on the year that we'll start to narrow that range. That's the way I would look at this. And we're also indicating to you that the first quarter, because of tough comparisons to last year, is going to be a lower quarter. And David walked you through those numbers. So what I expect is going to happen is we're going to narrow this as things go on. As we said that bottom end of the range, the environment would have to deteriorate for us to get down to the bottom end of the range. That's the way I think about it.

Okay, and thanks for the clarification. And then could you -- the detailed question is just around Safety and could you maybe just talk about what you're seeing. You mentioned emerging markets still growing well, but you mentioned international. Are you getting traction in Europe with the safety products given the directive there and regardless of what's happening in those countries. I guess, what's happening with Safety growth in the European countries?

Yes, sure. Happy to do that. I'm going to ask Gary Cohen to walk you through it.

The short answer is yes. We're getting traction. Safety growth has been accelerating in Western Europe. We had a strong finish in the year driven by a much stronger fourth quarter relative to earlier in the year. It's also gained significant traction, pretty much in all of the international markets, with exceptionally strong growth in Latin America, very strong growth in Asia Pacific. In the quarter, we even had strong growth in Safety in Japan, in Canada. So pretty much in all markets, except the U.S., which is now a mature market relative to safety-engineered devices. We were seeing very strong growth. Double-digit or above in all markets. Canada just very slightly below double-digit, and an acceleration in Western Europe. So the trend has been very positive.

And can I just have one clarification on Safety. On the pricing issue, are you seeing -- because of what's going on in those countries, what's the pricing impact in Safety?

What we're doing is we're really tailoring our offering to the economic situations in the various countries we're operating in. And we're not seeing the pricing pressure that the company is experiencing overall. It tends to be focused in particular areas, and those are not necessarily in the safety-engineered devices.

Your next question comes from the line of Amit Bhalla with Citi.

I was hoping you could just talk for a minute about leverage from the top line to the bottom line in a more normalized environment because clearly, there's a lot of one-timers or issues that are impacting the fiscal '12 guidance. And then can you also just talk to us about the long-term outlook for the company, if there's any revisions to how you feel the BD's going to be operating.

So starting with your second question, we're not going to guide over the long term. When the environment is so uncertain, we just don't think that's prudent. And that as things evolve, we'll be changing our outlook. So we're not going to do that on this call. I would encourage you to come to the Analyst Day that we have coming up, and you can see firsthand some of the really interesting products that we're going to be launching. In terms of thinking about the P&L, we are -- it's still our goal to get 50 basis points of leverage across the P&L. And in fact, if you look at what's going on, let me just start on the SSG&A line. What's happening right now is, we are investing more in the sales and marketing area, especially for emerging markets. And it's a significant investment this year. While we're doing that, we have become more and will continue to become more effective on the G&A line. If you go back, I think -- David, the 2008, is it? We've improved about 0.4 percentage point and over 1 percentage point if you take out the impacts of EVEREST. EVEREST is costing us about $68 million this year. EVEREST, from a project expense standpoint, finishes -- we go live in '12, so the project starts to ramp down, we pick up the amortization and we just get a little bit more spending in fiscal '13 on EVEREST. So we start to get that behind us. This has been a big ramp up. The other thing I'd like to point out to you that we've been jumping over, of course, is the pension. We mentioned we're going to make contribution to deal with that this year. So emerging markets, as I was talking about in terms of an investment was $60 million. EVEREST is about $20 million and acquisitions this year, you're going year-on-year, is about $20 million as well. So there's a lot of things in the P&L we're jumping over, including the $25 million on raw materials, with about 60% of that being the resins. And we haven't seen the resins start to move yet even though oil prices have moderated. So we'll see what happens with that. But those are kind of the major elements that we're talking about.

Your next question comes from the line of Brian Weinstein with William Blair.

This is actually Pete in for Brian. I was wondering if you could break down your 2012 growth expectations between organic and non-organic terms. So if you could just break out between current, new product launches and maybe the acquisitions as well.

Yes, David will do that for you.

Yes, I mean, it's pretty straightforward between Accuri and Carmel all-in. It's about what we said on Accuri is about 1 to 2 basis points of growth to our Biosciences business. And on Carmel, what we communicated is about $50 million is what we're doing this year, and the market overall is growing about 10 basis points. So that gives you an idea of the range of those 2 acquisitions. The majority of our growth still remains organic.

Right.

And the new product launches?

Sorry, 10%, I'm sorry. The market on Carmel is going 10%.

Yes, not 10 basis points.

Right. And can you break out the new product launches from the existing products?

I don't think we have -- we don't have that level right here. And we'll be going through that on the Analyst Day.

You'll see that next week.

Your next question comes from the line of Bill Bonello with RBC Capital Markets.

This just sort of follows up on your answer to one of the previous questions. So just to get a little more clarity. You mentioned about 5 or 6 different items that are putting pressure on the margins in 2012. And just to make sure that we've captured all of those, would you mind sort of walking through one more time the relative impact of raw materials, software, acquisitions, investments, just so we have it accurate.

All right. I'll ask David to walk through the gross margin then we'll walk through the investments on the SSG&A lines as well for you.

Okay, as we talked about, some of the one-off things. One is that the raw material increase that we're seeing year-over-year, as Vince talked about, that was around $25 million. What I'm talking to is just the gross margin. So we lose about 30 basis points there. The acquisitions that we have caused us to lose about 20 basis points of gross profit margin. And the software amortization's around 20 basis points of gross margin. So those are the major one-off factors that are really impacting us as we go into 2012 from a gross profit margin perspective. As Vince talked about, we have about $100 million worth of investments that we believe is in the best interest of the company long-term health to continue to invest in. We got $60 million that we're investing overall in emerging markets next year that's an increase year-over-year. We also have $20 million increase as we go much towards our SAP implementation in North America. And then as also, we've mentioned earlier, got about $20 million related to our acquisition costs with Carmel as we continue to invest and selling as well as in R&D programs with that. That's also the other factor. And as we talked about on the revenue side of things, price was slightly below 100 basis points this year on the revenue line, and we're anticipating that to be slightly above 100 basis points in fiscal year '12. So those are the major components that's driving that. And as Vince mentioned earlier, that's why we still have confidence in the 50 basis points year-over-year increase in our operating income because of the nature of these items.

Okay. And just with the $60 million in emerging markets, did you say that was $60 million incremental investment in emerging markets?

That's right, $60 million incremental.

Your next question comes from the line of Bill Quirk with Piper Jaffray.

Couple of questions for me. First off on the research spending environment, Bill or Alberto, would you expect us to improve post super committee? In other words, as we move throughout the year, shouldn't we get little more clarity in spending patterns?

Bill, do you want to take that?

Yes. So you're talking obviously NIH spending in the U.S. And quite honestly, I don't have a crystal ball. To be perfectly frank, I think that it's more relevant to take a look at Western Europe where we actually see stabilization and some improvements in research spending. In the U.S., to be perfectly frank for our Biosciences business, the exposure to NIH-related spend i.e., selling into NIH or capital equipment that is purchased with NIH funds, the exposure is really not that great for the Biosciences business. It runs around 5% to 6%. And until the super committee says something and we know what that NIH budget is, it's very hard for me to comment on that.

Understood. And then just a quick housekeeping question, can you guys break out the GeneOhm, TriPath and the STD impacts in the quarter?

I'll take that. This is Tom Polen. So for TriPath, TriPath grew 7.9% for the quarter, which was strong -- on a full year basis, TriPath grew 6.6%, so most -- large portion of that growth is coming from emerging markets we continue to see in the U.S. volume pressure as Pap testing intervals are continuing to be extended as a result of recommendations that were made a few years ago. So relatively flat in the U.S. and strong double-digit performance in most of the rest of the world for TriPath. On GeneOhm, your question, it was relatively light quarter for GeneOhm. We grew 4% in the quarter, 11% for the full year FY '11. We are continuing to see strong double-digit growth for Cdiff. We have seen slowdowns in MRSA due to really 2 major factors, one is, is there were several lost accounts that impacted the quarter; and the other major factor is we're seeing -- we are seeing slower new placements of our SmartCycler product there, as we're seeing customers begin to hold purchase decision. You got to keep in mind MAX MRSA assay launches in less than 90 days in Europe and of course, launches in Q3 in the U.S. So we do see customers anticipating that platform with much excitement, and we're seeing them hold off on their SmartCycler decisions at this point. So we are still making placements, but not the same rate that we were earlier in the year, and we see the sting of bridging period between that SmartCycler product and our launch of MAX.

The STDs?

STDs, thanks for the reminder, 5.1% for the quarter, 5.7% on the full year basis. No major items in the quarter.

Your next question comes from the line of Nandita Koshal with Barclays Capital.

I was wondering if you could provide us an update on the BD MAX, how the uptick has been there, better or slower? What is the expectations? And then on some of the content rollout from the BD MAX, obviously, competitors in HAIs making some very good progress this year, if you could talk about the timing there and just your outlook for the market?

Sure, Tom Polen will do that.

So BD MAX is, as you know, launched in Q3 of FY '11 as an open system and we're very pleased with early customer demand, which is on track with our expectations. We're getting very positive feedback not only on its high level of automation, flexibility but also how easy it's been for customers to port over their own assays. And at this point, we have a number of customers throughout the world who have ported over their own assays at this point and are running those in their laboratory. Of course, at this point, we have not launched any IVD assays yet on MAX, although those are now coming up in FY '12 with our first product launching as we've communicated in early Q2 in Europe, which is MRSA. And our first IVD product in the U.S. will be GBS, which we expect to launch at the end of Q1, followed by MRSA and Cdiff later on this year. We also have a series of our partner assays which we've shared in our strategy in the past. And we'll be further -- providing further details at the Analyst Meeting next week on, but our first partner assays begin to launch early Q2 in Europe. So as you mentioned, we recognize that there's a number of individuals launching menu in the molecular space. We're now about to enter into a quite intensive phase of menu expansion for MAX and we expect that phase to begin in Q2 of this year. Now we're ramping up with the major launch of MRSA, and then you're going to see assays launching either from us or our partners every quarter for the foreseeable future. And again, we're going to provide a much greater detail on the quarter-by-quarter launch schedule at our Analyst Meeting next week.

Your next question comes from the line of Jonathan Palmer with CLSA. Jonathan J. Palmer - Credit Agricole Securities (USA) Inc., Research Division: I was wondering if you guys could just talk through the geographic assumptions you have for the 2012 guidance. By my math, with emerging markets accounting for about 20% of sales and growing somewhere close to 10%, that would account for just about all of that incremental growth between this year and next. Could you just maybe talk through what you have for the U.S., Europe and Asia.

For the U.S., from a revenue standpoint, we have 0% to 2%; and for international, 4% to 6%. So that's the breakout, with stronger growth in international driven by the emerging markets. And I think Gary has a little more color on the international growth.

Yes. Well, first, your observation and much of the overall growth is coming from emerging markets is correct, not all of it, much of it as it was in 2011 as well. We're expecting slightly higher growth -- somewhat higher growth in '12 in Western Europe, in '12 versus '11. That's largely on the basis of some one-time factors that occurred in '11 that depressed the reported in Western Europe or the FX mutual growth that don't reoccur. So we're looking at low single digits sort of between 0% to 5%, right in the middle of that range. We're looking at good growth, continuing strong growth in Asia Pacific, slightly higher than what we experienced in 2011. We start to see a rebound in growth in Japan coming off of the disasters that they had in 2011 that was evident in the fourth quarter. We're looking at a more than doubling the low single-digit growth rate in Japan. Latin America, strictly strong growth in '11. We're seeing that a little bit lower in '12, but that may have a little bit conservatism in it. We're looking at higher single digits rather than lower double digits in Latin America. The EMEA region, Eastern Europe, Middle East and Africa, had very strong growth in '11 in the Middle East. The fourth quarter was light in Africa due to the timing of major international funding for things like HIV/AIDS and childhood immunization. We're looking at mid to slightly higher single-digit growth there. And I think I've covered all markets. Canada has been a good grower despite it having the characteristics of an industrialized market. And we're looking at slightly above mid single-digit growth there. Jonathan J. Palmer - Credit Agricole Securities (USA) Inc., Research Division: That was very helpful. And then for David, could you just tell us what's implied in terms of interest income and expense for 2012?

We're not breaking out the interest income and expense individually.

Your next question comes from the line of Sara Michelmore with Brean Murray. Sara Michelmore - Brean Murray, Carret & Co., LLC, Research Division: Vince, can you just talk through the Pharm Systems dynamic side. I understand that's kind of a lumpy business and you mentioned some of the tough comps. But if you can just kind of clarify exactly what's going on there, and what I want to make sure is that there's not a change in the outlook for that business based on anything that's happened in the last couple of months?

Sure. I'm going to ask Bill Kozy to walk you through that. But just to kick it off, there were couple of dynamics. There's a regional dynamic between going from last year to this year in terms of the growth rates in that business, and there is also -- with some shift in the way customers bought. But in terms of the year-on-year growth rate, on a worldwide basis, there were 2 issues that we mentioned, and it's around low molecular weight heparin and some sampling, Bill, maybe you want to give some more color and kind of future outlook for that business.

Sure. I think that you've covered the key points. To put a little more detail on it, there was some significant stocking ordering that took place in fiscal year '11 for the launches, particularly in the U.S. for low molecular weight heparin. Additionally, and as a separate item, there was above-plan sampling for clinical trials with a number of our biotech customers. These are typical purchases that people are looking at sampling of a new drug launch in a pre-filled format. And we had an inordinate number of those. Those were important factors in the ex-pandemic growth of Pharm Systems in FY '11 of a little over 6%. And so that 6% was just a little hotter than what it would've been in a normalized environment, so their projection for next year more in that 3% to 4% range is traditionally in-line with their above-market performance. So there's no other significant items happening there.

And so then next week, we're going to be talking to you about a series of new product launches as well and entering into some new space with Pharm Systems. So hopefully, we can have a good dialogue around that next week. Sara Michelmore - Brean Murray, Carret & Co., LLC, Research Division: And then just a question on the pricing overall, I mean, in terms of the price pressure you've seen, I mean, what has been sort of the mechanics of that? Is that related to the way customers are buying or dealing with you has changed? Is it a tender issue? Could you just give us a sense of what exactly has been agent of change in terms of the lower pricing.

So Bill Kozy will comment on that.

Yes, this is Bill again. Two factors, and you've already highlighted one of them. We have seen the expansion of tendering on a number of agreements, particularly in Western Europe, and that's been across a number of our businesses. Number two, we've seen a lot of interesting things happening in terms of product mix. Now let me give you a practical example of that. In the Diabetes Care business, you're now seeing more interest in private label products versus what you've traditionally seen in branded syringes. So there is a mixed impact for us, that's another small factor in this. And then in the U.S., you have had the ongoing very traditional GPO bid process. We don't see anything different there. We just saw some timing last year and I'm talking about fiscal year '11, where some of those major device contracts did happen to come up and get reassigned for the next 2 or 3 year period. Those would be the key factors.

Your next question comes from the line of Jeff Frelick with Canaccord.

Question, given the 2012 guidance, what are the expectation in that guidance for the upcoming flu season and Safety growth?

So we've -- I'll ask Tom Polen to talk about that.

In terms of flu season, it has been assumed to be a normal flu season. It's off to that start.

And for safety, we're looking at similar growth in the international markets to what we achieved currency-neutral in 2011. So we're seeing continuation of that positive trend and marginally, higher growth in the U.S., that's driven in large part by the Carmel acquisition.

Your next question comes from the line of Peter Lawson with Mizuho Securities.

David, just wondering if you could talk through the R&D line. What was the project and what was the impact of 2012 revenues in EPS?

Let me just repeat the question for everybody. I think what you said--it was hard to understand you, But I think you were asking about by the R&D write-off in the fourth quarter, which was really the Ovarian program.

That's right.

And the impact on that is around $0.03 on an EPS basis in fiscal '11 which is about $9 million.

And just to add, there's no impact. That was a pipeline project. There is no impact on revenue now nor in the outlook for Diagnostics.

And then so ReLoCo II, what are the cost savings you think for 2012, or do you think that's more of a back-end loaded 2014 event?

Well, the majority of the savings come in the future years. A small amount of it occurs in '12 but not a big piece at all. Jonathan J. Palmer - Credit Agricole Securities (USA) Inc., Research Division: And then just finally, David, thanks for the break-out for the moving parts of the P&L, of the EPS number. But mid- single-digit, EPS growth doesn't look like a new norm. Do you think you get to the underlying EPS growth -- very close to double-digit in 2012?

The underlying growth rate, yes.

Your next question comes from the line of Doug Schenkel with Cowen and Company.

Just first question, a quick question on guidance. I want to make sure I heard you right that Q1 guidance was set at $1.13 to $1.17 for EPS. And if so, is there any front-loading of expenses, I guess, should the expectation that margins and EPS growth does improve over the balance of the year?

So we're not front-loading expenses in the P&L. It was really a question of tougher comps in the first quarter. And I believe, we have strong Pharm System sales in the fourth -- in the first quarter. Last year, the pricing impacts that have hit us during fiscal year '11, most of that occurred in the second half of the year.

And on the raw materials side...

Raw materials as well.

The base impact is in the first quarter as well because we saw raw materials increase throughout the year but you get the comp, difficult comp in the first quarter.

So you have a number of factors coming together, but it's not expense-loading.

Okay, and then I guess maybe a bigger picture question that I think a few folks have tried to get at. Keeping in mind that when you look across your comp universe, you screen really well from a returns perspective. To your credit, you're a consistent grower. You do it organically, you're not a serial acquirer. That being said, one of the primary concerns I think in the investment community is really what is your inherent growth rate and are you managing the business accordingly? If you go back and you look back to '09, '10, now '11 and now you look forward based on what you've guided the Street to expect, you've been 3% to 5% grower with some good tailwinds in some years and some tough headwinds and others. Is this the growth rate that you're managing your business to on a multiyear basis? And I guess, just as importantly, is this how you're managing your spend? This year, you are increasing your spend, as you've talked about a few times on this call, I mean, would you say that the success of that spending is predicating -- is predicated on accelerating your organic growth outside of this range?

Well, our plan is to accelerate growth. First is, we have been increasing our R&D spending over the last few years. And we've generally increased that faster than revenue growth. And we're going to talk about those programs next week and how we see those programs. The good news here is we're going to be talking about things that are launching in '12 and '13, so it's not everything that's in our pipeline, but the near-term stuff. So we're seeing products that are moving through, both from the organic side and also leveraging some of the acquisition work we did, the HandyLab would be an example, and then turning around and partnering to leverage that acquisition. So the intent, of course, is to increase the organic growth rate of the business. I'm not going to get into guiding specifically at this point in time. On the acquisition side, we've done both technology acquisitions, let me call them small plug-in acquisitions, like Carmel Pharma where we're picking up sales, an operating entity that we can integrate easily, where we have capabilities that play in the operation side. Those sorts of deals that can add to our growth rate, we are going to be looking for in a very disciplined way. So it's both of those things we're looking at to drive incremental growth.

Your next question comes from the line of Robert Goldman with CL King. Robert M. Goldman - CL King & Associates, Inc.: I was hoping to take a little bit of a step back and ask a question from an industry perspective. I'm not looking for Becton, Dickinson's long-term guidance. But I've been following the industry over 20 years and I think up until this year for every one of those years, you could pretty well bank on prices between actual price increases or mix trickling up every year. Now industry-wide, they're trickling down. and I'm just wondering, Vince, what gives you a sense of confidence that for the next 20 years, this industry is not going to experience this just sort of steady price-mix erosion since at the end of the day, the industry-wide operating margins are well in excess of the U.S. corporate average?

So it's a great question as to what's happening across the industry for the long term. And I think it's very much dependent upon the value that you bring in this new environment. And if you're bringing features that are not highly valued by the marketplace, or don't correspond to this new environment, I think you're going to be on the side that you were talking about, which is the trickle-down side. But, if you go out and you talk to our customer base, our customers will tell you that they have major labor issues, efficiency issues and clinical issues. And if you can do -- come out with new solutions that makes healthcare safer and more effective and takes down their cost structure, and we're doing a lot of health economics work which was really not done in the device industry before, we see ways where there's a win-win for us and for our customer base. And I'll just point to one example, it's a short-run example, but ecoFinity is an example where we're not just selling the product, it's a service that's involved. And if you're the head of administration for a hospital, you've got to manage both your device-spend and you've got to manage your recycling costs. And net-net, with ecoFinity, we can save you money and it's not a pure price issue. So it's going to take more creativity to get there. You're going to have to be more rigorous on the economics piece of your argument, you're going to have to prove it, but we see a lot of opportunities to do that and we see them as expansions of our core business. Robert M. Goldman - CL King & Associates, Inc.: So where does your R&D to sales have to go to accomplish those objectives?

So as I mentioned in the beginning of my remarks, we have been increasing our R&D. We're now at about 6% of sales. Over the long run, we may take that up a little bit higher, but it's not a major step increase to do that from where we are as we look at our pipeline. So we have one more question, I believe.

Your final question comes from the line of Kristen Stewart with Deutsche Bank.

I just wanted to take a step back because it's kind of all been addressed throughout all the questions, but I'm still not particularly clear on it. But relative to where you were in July, you had mentioned that you would expect 2012 to be roughly in line with what you have been seeing through the course of 2011, which is 5% underlying top line, and then 10% underlying EPS growth and you never really quantified in July what their share buyback assumption would be. So I'm just curious, from a kind of EPS perspective, what really is the difference between what you had thought 2012 outlook would look like in July relative to where you're guiding today, especially given the fact that the buyback would assume it would be more accretive, and so, it would really mean that the underlying business would be deteriorating at a much faster rate than certainly your fourth quarter numbers would suggest?

Well, I started out on the environmental factors at the beginning of the call and how things change, and then talk about Pharm Systems then the raw material price increases then the cost of acquisitions. But David, you want to take some?

Sure. Absolutely. First, really good question on the share repurchases. Recall we were assuming we're guiding about $600 million in share repurchases. And if we did share repurchases at that level to be internally funded, as we move to $1.5 billion in share repurchases. As I said earlier on the call, the majority of that will be funded through a debt offering. And the interest expense of the difference between those 2, in fiscal year '12, you don't get much accretion when you look at the difference because of the interest costs associated with the offering. So that's the first one. The other is that the guidance on the 10% bottom line EPS growth that we provided in July was currency-neutral. So we lose about 2 percentage points because of currency, how they moved since July to what we're assuming for next year. As Vince talked about as well, you lose about a percentage point because of the pricing--as the pricing deteriorated. We've built that trend continuing and remember that, that started out in the second half of fiscal year '11 and we're assuming that goes through the full year of fiscal year '12. And then just with the utilization, what we saw from a utilization perspective, you lose about 2 to 3 percentage points there, on -- again, as Vince talked about, how we're looking at that and just being prudent. We want to put a forecast out there that we're confident that we can meet. And lastly, building in the acquisitions that we had, that's about a percentage point that we lose because with the -- from EPS perspective, the dilution was about $0.04 in fiscal year '11. It's around $0.08 in fiscal year '12. So when you put those all those components together, that gets you to where we are from the guidance perspective. And we've broadened the range, again as Vince mentioned earlier, just to reflect the uncertainties in a macroeconomic environment. But we're feeling very confident about the guidance that we're providing you today.

So basically, over the last 3 months, you guys have seen things that make you more concerned on price and more concerned on utilization. And on the acquisition side, are they running more dilutive than what you would've anticipated 3 months ago? I know your guidance include acquisitions, originally.

No, they're about right where we expected them to be.

Okay. But it's just raw materials, utilization and pricing trends over the last 3 months have gotten that much worse?

And FX. So let me just sum up here. So as we've been talking about during the course of the call, it's obviously a challenging environment for us and others in the industry. We think we've taken a prudent approach to our forecast, given the environment. We've expanded the range at the beginning of the year. We'll look to tighten that range as we move forward and as we get more clarity. There is a number of one-time items impacting profitability, the step-up in software from the amortization impacting the GP line, the acquisitions and the raw material costs. In spite of all that, we see a lot of good opportunity, reflecting that by our investments in both R&D and especially in emerging markets. We're launching a record number of new products. We're going to talk to you about that and that impact on a go-forward, multiyear basis next week. We look forward to having that conversation. We are driving our internal efficiency programs. ReLoCo I is on track. We accelerated the work on ReLoCo II, given this tougher environment and we quantified that for you on the call and that looks like that, that is going to be another major cost savings for us. Our G&A programs, as I indicated, we are managing G&A down as a percent of sales and reinvesting in the sales and marketing side to drive growth. So we think all of these programs are a good fundamental, a strong foundation for moving forward and I just like to say we look forward to seeing you next week. Thanks for all of your questions.

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time, and have a wonderful day.