The Roper Second Quarter 2013 Financial Results Conference Call will now begin. I will now turn the call over to John Humphrey, Chief Financial Officer. Please go ahead, sir.

Thank you. And thank you, all, for joining us this morning as we discuss the results of our second quarter. Joining me this morning is: Brian Jellison, Chairman, President and Chief Executive Officer; Paul Soni, Vice President and Controller; and Rob Crisci, Director of FP&A and Investor Relations. Earlier this morning, we issued a press release announcing our financial results. The press release also includes replay information for today's call. We have prepared slides to accompany today's call, which are available through the webcast and also available on our website at www.roperind.com. If you please turn to Slide 2, we begin with our Safe Harbor statement. During the course of today's call, we will be making forward-looking statements, which are subject to risks and uncertainties as described on this page and as detailed in our SEC filings. You should listen to today's call in the context of that information. Next slide. Today, we will be discussing our income statement results for the quarter, primarily on an adjusted basis. A full reconciliation between GAAP and adjusted measures is in our press release this morning and also included as a part of this presentation, which is available on our website. For the second quarter, the difference between GAAP and adjusted consist of these 3 discrete items. First, a fair value adjustment to acquired deferred revenue at Sunquest. For the quarter, this impact was $2.4 million to revenue and operating profit. This adjustment represents revenue that, absent our acquisition, Sunquest would have recognized. Second, a fair value adjustment to revenue for MHA totaling $18.5 million. Again, this represents revenue that, absent our acquisition, MHA would have recognized. Finally, we included in our press release a one-time charge related to a vendor-supplied component that did not meet our quality standards. This component is used in our Hansen business, Hansen, which provides refrigeration valves for cold storage applications. The $9.1 million charge in the quarter is our accrual for the estimated cost of this replacement program, and any expected recovery from our supplier will be tracked and reported in the same way as we continue throughout the year. We believe showing our results on this adjusted basis provides additional insight into the ongoing and recurring result of the business. Now if you'll please turn to Slide 3, I will turn the call over to Brian Jellison, Chairman, President and Chief Executive Officer. After his remarks, we will take questions from our telephone participants. Brian?

Thank you, John. Good morning, everybody. So we'll start off with the Q2 results at the next slide. On the enterprise financial results for the second quarter, it was a record quarter for Roper. We had record orders, we had record backlog, record revenue, record net earnings and record EBITDA. So orders for the quarter were $835 million and revenue came in at $805 million, representing a book-to-bill of 1.04. The gross margin was up 300 basis points to 57.9%, really spectacular results. And all 4 of the segments expanded their gross margins, so it wasn't just a benefit of the MHA acquisition. EBITDA in the quarter was up 21% to $259 million, so we're tracking at greater than $1 billion of EBITDA now. Our EBITDA margin increased 270 basis points in the quarter to 32.2%. And I should really remind everybody that we have very little depreciation, so it's really all about intangible amortization that's noncash. And so our intangible amortization is now forecasted to be about $150 million for the year, all of our amortization, whereas depreciation is more like in the low 40s and CapEx will be similar to that. Our GAAP operating cash flow was up 17% to $140 million and our diluted earnings per share were up 14% to $1.31. We really thought that was a very compelling performance in a second quarter. Next slide. If we look at the income statement, here, you'll see that comparison of orders, up $835 million against $763 million last year. On the revenue basis, the revenue was at $805 million versus $725 million, so up $80 million or 11%. 1% of that was organic, and when we get to industrial, I'll comment on the fact that we still have that Neptune customer transition going on or organic would've…

[Operator Instructions] We will now take our first question from Matt Summerville from KeyBanc.

A couple of questions. First, with respect to Zetec, Brian or John, can you remind us how big that business is, what sort of cost actions you're taking as this resets to what I assume will be a permanently lower level and what ultimately you think that level of revenue is?

So Zetec is really a bifurcated business. We have a business, which is around sensors that uses eddy current for a variety of applications. And then we have a business which we originally acquired, which was focused on steam generation, which is the fueling tower application for nuclear plants. We've never really given any specific numbers. But I think we've probably said it's somewhere between 12% and 15-or-so percent of the segment. The reality is that we're looking kind of at a $10 million divot in 2013 versus 2012; might not be quite that bad because the eddy current sensor business is growing. And so if we can get that thing to grow a little bit better, it will help offset a little bit. But we had well over $5 million of revenue and $10 million planned. So I mean, we really did not expect the closure of San Onofre. That -- maybe reading about it, there were a lot of people, who didn't expect it and aren't happy about it. San Diego is wondering how they're going to produce energy but that's a problem they have to deal with. But thinking about next year, I wouldn't make -- it's not like -- we expect the business to develop new product in new markets and make up for those problems. So I don't -- it's not like -- I wouldn't reduce our model by $10 million in perpetuity because of what happened this year on that, maybe $5 million.

Got it. And then my follow-up, for CCC, what are you seeing that's driving the change in bidding activity? And can you frame that up numerically at all?

So the places where we're seeing a lot of bid activity, it actually moves beyond. So we have pipeline applications, particularly with some technology with the United Controls. So the UCG acquisition, the bolt-on we did about 2 years ago, some of that technology is able to be applied to some additional pipeline opportunities that we really didn't have technology for back when it was only CCC. So that's been helpful. And there's more activity on the upstream side. So CCC has done quite a bit on the upstream side, particularly on offshore platforms with control systems for compressors in those situations. And so they're seeing more activity there. I mean, predicting win rates is always a difficult thing, but there is sufficient bid activity there for us to see CCC as being somewhere between mid- and high single-digit growth for the next few years.

We'll take our next question from Deane Dray with Citi Research.

Brian, for the lower guidance on 2013, I think you've given a good explanation on the Zetec side. But you mentioned also the lower life science research. Is that in the imaging side? Or are there other businesses that are contributing to the lower outlook there?

Well, the research side of the business is what -- they had expected some improvement in Japan, some general improvement. We're not seeing any of that. And so we just don't think we can include it in our thinking. It could happen. When we look at that midpoint guidance coming down $0.06, it's really about 1/2 or a little more, 1/2 to 2/3, for Zetec. And it's the other 1/2 is sort of the imaging thing. We do have some OEM people on inventories that are not taking anything at all. So that whole industry seems to be really tepid. And there are a few products that get shipped into people that are using the imaging technology for transportation. And that business is certainly not robust, I would say.

Got it. And then you've given a good explanation about the Hansen valve replacement process. And just a couple of quick follow-ups here. What would be the timing for -- that you'd expect to complete the replacement? And is there any provision for liabilities? Have there been any damages other than just the replacement process?

Yes. There's sort of 2 different things going on. I mean, this is really beyond our normal warranty kind of thing that we wouldn't really even have to do what we're doing. But these are refrigeration valves that are supplemental point of safety applications in these plants in which they are. And there are various things that could happen. And this is one of those things that -- what happened is the vendor put on a transparent finish on these things, some of which is okay, many -- some of which is not okay and are eroding faster. So in our own testing in life cycle testing, we've seen some things that we didn't really like in June and finally, have gotten to the bottom of it. So in order to encourage people to make a replacement, we're covering some of their installation labor and giving them a new product if they send us back proof that they've made the change-out. So that portion of that, no matter how we end up with the vendor, we got reimbursed for the whole $9 million. It's still a charge we -- I mean, we're going to incur that charge. So our obligation, in our opinion, was to take care of the customer and the dealer network, and then secondly, take the charge. If we get all of it back or some of it back, we'd exclude it from our earnings performance anyway, which is why we think it's a one-time item. Now as far as the liability, we have deep liability protection if something were to happen. But this is -- it doesn't come to the insurance clause because it's really a product defect. No one's been hurt or injured. There's no difficulty. If you saw this valve, it's a casting. It's a pretty decent thing, maybe some of them the size of a bowling ball. And you've got this $2 part inside it, which if you don't change it out, 4 or 5 years from now -- they normally do, but it might not last for 4 or 5 years. It's something that we're just not comfortable with.

Yes. That explanation is pretty clear, appreciate that. Just one last quick one for me. For MHA, what's the impact on gross margin for the segment? And on a go-forward basis, how much is MHA contributing on the gross margin line?

I mean, I didn't -- it is clearly helping -- I don't have the exact contribution amount for MHA separate from the rest of it. At both Sunquest and MHA come in with -- because the way their business model operates, as well as because the value they provide to customers, both of them come in at north of 75% gross margins because all of the value they're providing is really in the operating expense side with the technology and the customer support model, the contracting arm, all of the software developers in those 2 businesses. So on a gross margin basis, they come in pretty high. Obviously, on an EBITDA margin, they're also above the company average as well. But, Deane, I'd have to get back to you with the specifics on how much MHA helps. But I know that even excluding MHA, we had gross margin expansion in the segment.

Our next question comes from Christopher Glynn with Oppenheimer. Christopher Glynn - Oppenheimer & Co. Inc., Research Division: Wondering what kind of the sensitivity is to the low end of the guidance. It seems like you're hedging some inopportune circumstances there perhaps.

Chris, I've got to say, I'm not quite sure I understand the question. I mean, we always try to do our best to provide an outlook for the rest of the year that we think is balanced and balanced between both risks and opportunities that we see across the portfolio of businesses. And that's kind of where we've come out with respect to taking a look at our guidance of $5.72 to $5.86. We think it's pretty well-balanced on both the plus and the minus.

Chris, if you just look at it, it was $5.76. We took it at $5.72, so it's $0.04. And there's $0.06 or $0.07 in these 2 items, which were unknown at the time of previous guidance, which would be Zetec and the situation with the life science research. So we've actually increased the low and net of those 2 negatives. So I don't really see -- I don't see the point frankly. Christopher Glynn - Oppenheimer & Co. Inc., Research Division: Okay. And then on the -- I'm just wondering what the pro forma leverage is and if there's room to negotiate a more liberal covenant, given the scale of the business now.

Well, so our covenant on the -- on our credit facility on a leverage basis, debt to EBITDA is 3.5x. And given our commitment to and desire to stay an investment-grade company, I don't see that 3.5x as being a constraint for us at this point. I mean, we're comfortable where we are. We'd be comfortable going up to 3x. And based upon the quality of whatever acquisition, we'd probably be able to spike above that without touching or getting close to the covenant items. I mean, this is a credit facility that, at $1.5 billion, is providing us with an awful lot of liquidity and allows us to have conversations to never have a financing contingency and those things. So it's a real powerful tool for us and frankly, it's not one that we're looking to redo. When it comes due in another 3 or 4 years, we'll take a fresh look at that.

We'll take our next question from Jeff Sprague with Vertical Research Partners.

It's actually Ryan sitting in for Jeff this morning. Just a quick question, maybe a follow-up to a comment made during -- Brian, during your pitch. You mentioned being positioned for another $1 billion worth of deals by early '14, I believe is what you said. Can you maybe just flesh that out a little bit more, talk about maybe whether it's one large one, a couple smaller ones, maybe just a little more detail there?

Well, we always prefer 1 large deal, 1 is easier than 2; 2 are easier than 3. And if we had our druthers, we'd do a $1 billion a year or $1 billion and another one for $200 million or $300 million. So it's an easy thing for us to do. There a lot of opportunities that are in that space. We tend -- we performed at such high gross margins and EBITDA performance, things we buy are always worth a lot of money. They don't carry massive revenue or massive fixed assets that other people buy. But we just like the idea of a larger transaction. I think when you get a Sunquest or an MHA, just like years ago when we acquired the TransCore and Neptune, you get exceptional, high-quality management. They're career-oriented people. They've got lots of succession people lined up. They're just far less risky than guys that are buying -- if you said, "Let's buy 10 $100 million bolt-ons that I could save a turn of EBITDA," I'll leave other people with that strategy. That's not our strategy. We want to buy and help people grow and use our tools to asset -- drive down their assets and reallocate their investment strategies. And that's what they do so well. So nothing's changing in that respect.

Okay. I guess, what I was getting at was, is there anything in the pipeline as you see it now that we should think about one way versus the other?

I don't think so. But there are certainly things in the pipeline. I mean, you'd have a rare month here, where we weren't actively engaged in a transaction with somebody.

Okay. And then maybe as a follow-up, wondering if you could give us a little bit more color about a couple businesses, mainly, what else is going on outside of the Florida tag slowdown in RF, and then maybe a little bit more color on the Neptune business in general.

I mean, the toll and traffic business continues to do very well for us. They have a very strong backlog with a couple of key project wins in Houston and also Harris County, which is also like Houston. So replacing and upgrading an awful lot of their in-lane equipment. So that's a project that we won earlier this year that we'll probably roll out over the next 3 or 4 years. And then the Florida tag upgrade project, which is important not only because of what we're able to do for Florida, but it also, once again, demonstrates the ability that TransCore has in almost a unique fashion to be able to have customers migrate from older technology to newer technology in a very seamless way. We have multiple protocols as technology has evolved. And so the, if you will, the language that those tags and readers speak has improved over time. And so we have the unique ability to have a multiprotocol reader, which allows them to have older hard case tags, as well as the newer sticker tags and a couple of other versions of those in one, single, seamless operating environment. And so that's the important technology for Florida but also for other areas that might look to be able to move up the technology curve as well. So I mean -- so those things are going extremely well. The Virginia ITS project is underway and will start to help out in the second half, as well as into the first half of next year. So we see a lot of positive things that are on the horizon for the toll and traffic business.

We'll take our next question from Mark Douglass with Longbow Research.

Looking at Neptune, you noted that housing starts are a gain there. I assume those replacement of installed base is using a much bigger component versus new housing starts. Where are you at right now with Neptune? What are your expectations as far as the replacement cycle?

Well, Neptune has done really well if they didn't have those -- you can't give us any forgiveness for losing one customer. But without that, Neptune was up over 10% in the second quarter. So we're tracking to very, very, very solid performance of Neptune. And we expect that they're going to perform well in the second half of the year once we get rid of this sort of measurement [ph] transition with that customer. So I think that's fine. The housing starts, we have such a big share of water meters in North America. I mean, if you have 30%, 40% share and you [indiscernible] the housing starts, where are those starts? Most of them are not in Bergen County [ph] . Most of these housing starts are in the south and the Southeast or the far west, we're very important. Anytime you're digging water meter pits, we have a very high share of that market. And that's what new construction looks like in most of the world when you're at or below the cost line. So it doesn't take much in the way those to help a lot. Now the other thing that happens is if you have an increase in housing starts, the normalized activity for replacement sometimes because of labor shortages and the municipal water facilities gets postponed a little bit while they're doing the activity around the new starts. So the 2 -- it's not necessarily one is unrelated to the other a little bit. But net-net, if you were to ask us if it would've been up 10% Neptune, excluding the customer loss in the second quarter, we would've probably said, "Well, it'd be difficult, but we achieved it."

And you're still expecting a strong tailwind in the back half obviously?

Absolutely, we are.

Okay. And then moving on to your oil and gas exposure. Is most of that share gains? Or can you discuss that a little bit? You seem to be doing better than underlying -- of other component suppliers in oil and gas. Is that...

Yes, there's a couple -- so our Roper Pump business, which actually reports in industrial and non-energy, has become largely an energy business frankly. That business has directional drilling products, which are a best-of-class in certain kinds of applications. And we're starting a new facility in Texas to take advantage of larger-diameter drilling mechanisms that we have developed. And we have a very special heat-resistant operation, which is unique. And really vendors are anxious to get us up and moving so they could shift over to those products. So that's driven a good deal of growth in Roper Pump. But the rest of oil and gas is really the refinery businesses which are back making instrumentation acquisitions. And then our Compressor Control business, which is at heart of pipeline technology for feeds and speeds around turbine compressor. And that business is doing well and continues to do well. So there's sort of no negatives for us in the oil and gas arena. And then we consider Zetec and our other sensor businesses in energy to be really industrial and more industrial. And by the way, just as an additional thing, Matt, you had asked about Zetec. Well, we've got 21 people, which was 8% of the workforce here this month.

We'll take our next question from Richard Eastman with Robert W. Baird. Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division: Brian, could you just talk for a second or 2 about Sunquest, maybe what the core growth looked like there? I know it's not included yet, but what the core growth look like there. You commented that by the fourth quarter, it should accelerate somewhat meaningfully. And I just was wondering how the -- or what an update would be on their ability to deliver kind of next-gen software.

So it's not just next-gen software, it's really upgrades and additional applications to the installed base. So that's what is happening. So -- and particularly, as hospitals look to utilize the software in the lab in order to be able to comply with meaningful use regulations, the existing sets of customers have been able to meet the first level of meaningful use with existing Sunquest software suite. And then there are additional applications that are necessary to demonstrate meaningful use into 2014. It's those upgrades that have created a sizable, a very nice backlog of activity for Sunquest. And they are ramping up their delivery capability against what's a much larger set of net new orders or additional applications than what they've ever experienced in the past. So from a revenue basis, it's always a little bit, I think, questionable to compare against pre-acquisition times because you're never quite sure everything that was in there. Even with the amount of diligence that we've done, it's not subject to SEC reporting and all the other things associated with that. But we see the revenue on a pro forma basis up kind of in the low to mid-single-digits. But we expect that to be better in the fourth quarter as they continue to execute against the sizable backlog. And it's not until the fourth quarter when Sunquest will turn organic from a reporting standpoint because we do wait until we have a full quarter to compare against under our ownership. Richard C. Eastman - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then just a second question or follow-up. On the M&A pipeline, Brian, is the pipeline still heavily slanted towards software-type businesses? And also is that again slanted towards the medical side of the business? Or are there opportunities in the other platforms that are equally as attractive?

Well, we've looked at a number of things, Richard, that we thought were pretty attractive and are in the energy arena. And they, for the most part, either have a high degree of embedded software or firmware in the product or they, in fact, are software companies. And there's 2 that we had recent discussions with that we like. But just we don't think they're really quite right in their kind of development life, if you will. We think they've got some work they need to complete. And if they get that done, well, we'd be really happy to circle back with them. And so those are things that might happen. There are a large number of people that tend to be in the -- remember, the sort of cash register world we live in around CBORD and Horizon and some other people that are collecting information that people use for invoice and processing. So there are businesses like that, that we look at and talk about frequently. Certainly, MHA has opened up an opportunity to look at some other businesses that are complementary to those businesses in senior care and just a number of different things that are going on there. People know that we're -- we just invested nearly $2.5 billion at Sunquest and MHA, so the investment banking community tends to just deluge you with things that are similar to that. And they certainly have done that. We haven't found any of those yet to be very compelling and we have other conversations that we like that are more directly related to our existing businesses around bolt-ons. And we have the luxury of generating cash in a hurry and we're always going to do a great thing as opposed to just doing something to have activity. So that's kind of where it is.

We'll take our next question from Steve Tusa with JPMorgan. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: What was the organic orders rate? I think it was -- the revenues, it was about a 10% contribution from deals. What was that in the orders number?

So on an orders basis, organic orders in the second quarter were down 2%. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Okay. And then what's the third quarter organic -- what should we kind of expect for the third quarter organic growth? What's embedded in that EPS assumption?

Understand the second quarter is that idea that they're down 2%, when 1/3 of TransCore came in, in the second quarter last year is not a normalized number. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Okay. So x that, what would order have been?

Probably must have been flat. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Okay. And then for the third quarter, what should we expect from an organic perspective? I'm just trying to understand the sequencing of the second half.

Well, I think we said that we expect revenue to be in the 5% to probably 6% in Q3 and somewhere between 6% and 9% in Q4. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Okay. And then what -- Perfect. Okay. And then one last question, just a housekeeping item. On the deferred revenue, it was up nicely sequentially. How much was MHA, how much did that contribute?

MHA does not actually have very much deferred revenue at all. So most of the deferred -- in fact, the deferred revenue growth that you see in the second quarter is annual renewals at our CBORD and Horizon businesses, as well as additions at Sunquest. It really does not apply with MHA. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: So that's a pretty positive move there, right?

It is. Yes. So a, it's a positive move. And it's also a little seasonal with respect to when the renewal period happens for college and university customers. Those renewals generally happen in the second quarter due to their fiscal year and the way they roll out new projects. Even without that though, it's still a nice increase for us. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Right. That's terrific color. Just one last question. I guess, the segment that I just want a little more detail on would be energy. I guess, Compressor Controls is obviously going to be up. Your orders were up kind of low single-digits. There's a headwind from Zetec. It looks like around 3% there, $10 million year-over-year. In the second half, are we talking about -- are we -- we're talking about growth there, obviously. Is it that kind of low single-digit, just below the average of the company for the second half in energy?

I would say that for the segment in total, it will be about similar to what the total company will be in the second half from an organic basis. True, the drag on Zetec will hurt that, but the oil and gas portion of that segment is actually growing faster than the company. So net-net, it's kind of in line. So as we look across the 4 segments for the second half, we see more of the organic side coming from RF, less of the organic coming from industrial because we do still have a little bit of the headwind, although it does go away by the time we get to fourth quarter with that customer loss. And then the rest of it kind of in the range.

We'll take our next question from John Quealy of Canaccord Genuity.

Can you talk about on Industrial Technology the impact to margins on the Neptune headwind, either Q2 or rest of year?

From a margin perspective, it's de minimis. They're all about the same type of margin profile. The only time when we have a little bit of margin movement, if you will, is when, for example, on our Toronto project, where we're not only providing the meters and technology but also doing the installation services. So that's something unique to the Neptune business in Canada. And the installation services, which is the labor force and temporary labor that we're able to bring on for in order to do the installs themselves, that labor portion doesn't have the same type of technology and other things that we have embedded in the meter. And so it comes at a slightly lower margin. But other than that, all the meters are generally similar in terms of margin profile.

Okay, great. And in terms of my follow-up, tolls and traffic, you talked about good visibility with Houston and the Florida migration now, I guess, Q4 into year. But can you talk about refilling the backlog in terms of the pipeline of projects? How do you characterize that environment?

Well, those things, and when you get orders are always really very, very lumpy. So we're involved in a number of big projects. We've got a good deal of new activity that we're looking at in Dubai. We have new activity in some other portions of the Emirates. We have additional activity we're working on in Puerto Rico. And then we have substantial activity here in the U.S. that we're working on. We've really beefed up our regional sales organization so that we're getting much more direct customer focus than we frankly have had in the past. We've got considerable amount of management talent. And those guys are very, very bullish about what they think will happen in 2014 and 2015, so they would expect record performance off of these various projects. And then the profitability is -- sort of circles around what the mix of the business is because the reader technology and the tags, of course, are higher-margin than the service business, but the service business has higher total revenue. So while we wouldn't establish guidance yet for 2014, we would expect for our ITS and Amtech businesses to have growth that could well be above the company projection for 2014. And I think, John, with that, we're 9:30.

That is correct. Yes. We've actually reached the end of our allotted time. So I think that we're all set at this point. Kyle, can you wrap it up?

That will end our question-and-answer session for this call. We now return it back to John Humphrey for any closing remarks.

Okay. So once again, thank you, all, for joining us. And we look forward to talking to you again in 3 months as we complete our third quarter.

This does conclude today's conference call. Thank you, all, for your participation.