Good morning. Welcome to the Waters Corporation Fourth Quarter 2011 Financial Results Conference Call. [Operator Instructions] This conference is being recorded. [Operator Instructions] I would like to introduce your host for today's call, Mr. Douglas Berthiaume, Chairman, President and Chief Executive Officer of Waters Corporation. Sir, you may begin.

Thank you. Well and good morning, and welcome to this, the Waters Corporation Fourth Quarter Financial Results Conference Call. With me on today's call as usual is John Ornell, Waters' Chief Financial Officer; and Gene Cassis, the Vice President of Investor Relations. And as it's our normal practice, I'm going to start with an overview of the quarter's highlight, and then John will follow with details of our financial results and provide you with an outlook for the first quarter of 2012 and for the full year. But before we get going, I'd like John to cover the cautionary language.

During the course of this conference call, we will be making various forward-looking statements regarding future events or future financial performance of the company. In particular, we will provide guidance regarding possible future income statement results of the company this time for Q1 and full year 2012. We caution you that all such statements are only predictions and that actual events or results may differ materially. For a detailed discussion of some of the risks and contingencies that could cause our actual performance to differ significantly from our present expectations, see our 10-K Annual Report for the fiscal year ending December 31, 2010, under Part I, captioned Business Risk Factors. We further caution you that the company does not obligate or commit itself by providing this guidance to update predictions. We do not plan to update predictions regarding possible future income statement results, except during our regularly scheduled earnings release conference calls and webcasts. The next earnings release call and webcast is currently planned for April 2012. During this call, we will be referring to certain non-GAAP financial measures. A reconciliation of the non-GAAP financial measure to the most directly comparable GAAP measure is attached to the company's earnings release issued this morning. In our discussions of the results of operations, we may refer to pro forma results, which exclude the impact of items such as those outlined in our schedule entitled Reconciliation of Net Income Per Diluted Share included in this morning's press release.

Thank you, John. Well, 2011 was a second consecutive year of double-digit sales growth and even faster earnings growth for Waters. Successful new product launches and healthy demand from our pharmaceutical customer base have been key factors in driving our growth. In addition, we continue to benefit from faster growth in developing countries and opportunities associated with our applied markets such as food testing and clinical diagnostics. In short, we have offered industry-leading products and enjoy superior access to faster growing market segments, positions our organizations have worked high to achieve over a multiyear period. I think it's also important to note that 2011 was a year of investment for Waters. During the year, we continued to bring new systems to market across all our major product lines and expanded field personnel to support rapidly expanding customer bases in these developing regions. We're confident that we have an adequate foundation to grow top and bottom line results in 2012, while maintaining our reputation for industry-leading customer service and support. If you'll look at the fourth quarter, our sales grew organically 8%, and our adjusted earnings per share were up 13%. And all these results were a bit ahead of our expectations and represent the impact of continued strong business momentum. For the Waters division, we saw strongest growth in our pharmaceutical and industrial chemical end markets. The pharmaceutical growth was particularly strong in Western Europe and in the U.S., indicative of a continuation of an instrument upgrade cycle that I cited earlier this year. The combination of government and university shipments held up reasonably well during the quarter, most notably for the SYNAPT G2 system shipments that were delivered to academic institutions throughout the quarter. Going forward, as a result of continuing austerity measures, we expect less robust global sales…

Thank you, Doug, and good morning. Fourth quarter sales increased by 8%, and non-GAAP earnings per share per diluted share were up 13% at $1.56 this quarter compared to earnings of $1.38 last year. On a GAAP basis, our earnings were $1.51 this quarter versus $1.36 last year, and a reconciliation of our GAAP to non-GAAP earnings is included in our press release issued this morning. Reviewing Q4 sales results in comparison to Q4 last year, sales were up 8% with foreign currency translation about neutral to sales growth within the quarter. Looking at our sales growth geographically and before foreign exchange effects, sales within the U.S. were up 8%. Europe's sales were up 14%. Japan was flat and sales in Asia, outside of Japan, were down 1% against a strong base of comparison of more than 30% growth in the 2010 quarter. On the product front and in constant currency within the Waters division, instrument system sales increased by 7% and recurring revenues grew by 7% this quarter. Within our TA Instruments division, sales increased by 17% versus prior year. Now I would like to comment on our Q4 and full year non-GAAP financial performance versus prior year. Gross margin performance came in as expected at 60.8% comparable to Q4 last year. SG&A expenses increased by 2% this quarter, slightly less than expected as a result of less FX translation impact. R&D expenses increased as expected at about 4% within the quarter, and our full year effective operating income tax rate came in a little lower than anticipated at 16%. This is due to a modest shift in profits among our legal entities favoring our lower tax rate jurisdictions. Applying this tax rate to our full year pretax income increased EPS by $0.03 this quarter versus our October expectation.…

Thank you, John. Operator, I think at this point, we can open it up for Q&A.

[Operator Instructions] Our first question comes from Doug Schenkel with Cowen and Company.

You again highlighted resilience in the pharmaceutical end market, both in the U.S. and Europe. You attributed this to an ongoing replacement cycle. Could you just provide any color that's available on how balanced this replacement cycle is across LC and mass spec and also how balanced this replacement cycle is across the different subsegments within pharma, meaning CROs, generics and big pharma?

Okay, sure, Doug. I can give you a little bit of flavor on that. The quarter was remarkably balanced, I'd say, between LC and mass spec, very similar results. If you look within pharma, CROs were the strongest players, and our big pharmaceutical customers were flattish. So that's probably, I think, been a continuing dynamic. Although, we did see an absolute level of growth from our big pharma customers as you move quarter-to-quarter through 2011. I'd say the applications that were notable for their growth -- first of all, H-Class is -- continues to be the strongest performer in the chromatography area, and we see some clear signs that, that's penetrating into the pharmaceutical QC applications and that's penetration. So that's, I think, good news for us. At the same time, some of our new systems offerings that are aimed at the bio area, biopharmaceutical QC in particular, which is a different animal of course versus the small molecule world, are doing very well. So I think those are probably the notable dynamics.

And in H-Class specifically, I mean, you've done quite well there. There's a big install base to go after in -- of the alliance instruments within big pharma. How would you characterize what inning you're in, in terms of replacing those instruments with H-Class?

Oh, I think we're still early in the game there. We're really only in the second -- 2011 was the second year of the H-Class introduction, and I'd say we really only started penetrating those applications this past year. So I think we're early on, and we're very optimistic about the long-term opportunity there.

Our next question comes from Jon Groberg with Macquarie Capital.

I just had 2 quick questions. The first, Doug, is I guess maybe if you could provide a little more color geographically around how you expect things to play out in 2012. Obviously, you ended the quarter where Asia x Japan is down a little bit, and you were up like 32% last year. But maybe just talk geographically about how you see things playing out. And then, John, I was just wondering if you could -- you mentioned kind of flattish gross margins. I know currency probably is a little bit of an issue there. Can you maybe just talk about kind of organically what's happening on the gross margin line?

Sure. I think -- in term -- the way to think about our outlook geographically is you think about the -- what we call the emerging areas. I mean, we continue to use that terminology. Latin America, Asia, Eastern Europe, we strongly believe that those areas are going to grow above our corporate average in 2012. That's been true in the past, it's likely to be very true in 2012. We've got the applications, the organization and the momentum going there, and I think that's very credible. We think the areas of slower growth is still likely to be Western Europe. There's enough uncertainty around elements in Western Europe. Even though we're coming off a very good quarter, we're still a little cautious about Western Europe going forward. And Japan, we are hopeful that we see some relief, just structural relief in Japan, but we're going to wait to see that. The U.S., I think, is probably going to be around the corporate average. So that breaks that. John, you want to cover the...

Sure. On the gross margin, the thinking there is that we've got a little bit less volume leverage at a top line growth that's 6% to 8% instead of the 10% we just came off of. We plan on having a higher mix of Tof-based products in the mix, which tends to pull the margin down a little bit. And as you said before, Jon, FX is a little bit of a headwind. So there's small amounts of tenths of a point movement, plus or minus to kind of net to a rather flat position versus 2011.

Next question comes from Quintin Lai with Robert W. Baird. Quintin J. Lai - Robert W. Baird & Co. Incorporated, Research Division: Can you hear me okay?

Quintin, are you there? Quintin J. Lai - Robert W. Baird & Co. Incorporated, Research Division: Hello?

Yes. We're ready. Quintin J. Lai - Robert W. Baird & Co. Incorporated, Research Division: So again looking into the 2012 guidance, you talked a little bit about maybe a cautious look on the academic side. What are you seeing on the pharma side, Doug? Continued uptick? Is it new products? Or is it also just replacement of some of the changing out the aging instruments as well?

Well, Quintin, we have some natural benefit from products that were introduced in the second half of 2011, getting full bore in 2012, as well as focused application systems, like the regulated bioanalysis system, which combines the I-Class with the TQ-S and the system for biopharmaceutical QC. All of which were introduced kind of during 2011 and should provide us incremental growth in 2012. I think if you look at applications or broad areas of our business for next year, we think the broadscale pharma business is likely to grow at about our corporate average. We think the application-specific areas like food safety, food testing, clinical are likely to grow a little bit above average, and the government and academic business is going to grow below average. That's kind of the mix of our plan for 2012. Quintin J. Lai - Robert W. Baird & Co. Incorporated, Research Division: And then with respect to kind of new product introductions, you launched the TQ-S, I guess, 2 now. And last year, you introduced I-Class early on in the year. Is it now that new products will just get launched when they're ready or off the cycle of waiting for big conferences like ASMS?

Well, I think generally you'll find that major LC introductions are still made around Pittcon and major -- particularly higher-end mass specs are introduced around ASMS. So that's first quarter for Pittcon, late second quarter kind of for ASMS. That's still traditionally -- now you may introduce a system and not be shipping it for a couple of months. I mean, you typically don't want to wait much more than 2 or 3 months before you're ready to ship it because you're getting expectations and you're maybe cannibalizing your existing product line. So I think that, that's pretty much par for the course in the industry, and it's just the introductions don't necessarily closely follow for shipments.

Next question comes from Nandita Koshal with Barclays Capital.

I guess my first question would be on the competitive dynamics. This is an issue that we get asked about a whole lot, and I was wondering if you could talk about any market shares, dynamics in your key technology and markets about LC/MS, please.

Well, it's always dangerous to talk about change in market share dynamics based on one quarter. So I think there's nothing that I would feel comfortable about saying as a result of the fourth quarter. If you look at the full year and you look at our organic instruments growth, it was north of 10%. I think it's pretty -- I'm pretty secure in saying I think overall, we picked up market share in 2011. I think H-Class continues to penetrate into new labs and new applications that we didn't serve before. So I'm pretty comfortable with that. I think the introduction of our new mass spec systems has clearly garnered us new business. But I think in general, I think, that mass spec business continues to be very competitive. Nobody's getting out of the business, and so I think it continues to be a pretty vibrant, competitive area for all of us suppliers.

I guess, I was wondering with the consolidation that we've seen in the industry and more sort of LC/MS full suite of offerings coming from competitors, sort of wondering if that has changed anything.

Oh, I'd say certainly coming from consolidate -- I don't see any major dynamic going on as a result of consolidation. Certainly, not at this point. I'd say the competition that we're looking at, particularly in the mass spec arena, come from the same places we have seen it for the last 5 years, using the same competitive tools. And I don't see very much in the way of shifts resulting from consolidation there.

I really appreciate the commentary. And maybe one quick one for John on the gross margins. I know you mentioned the Tofs in the mix. But John, could you talk a little bit more around just the instrumentation system that we see some amount of slowdown on the instrumentation side and mix shifts towards the recurring revenues? What sort of benefit can we see from maybe include detach rates on consumables or a revenue pickup from your service investments last year?

I guess I'd say generally, Nandita, that we're looking at growth rates for 2012 that are relatively comparable for instruments and recurring revenue. So if there's going to be a mix shift in the year, it's going to be rather small. So I wouldn't think it would result in more than a 10 basis point change from flat. So I would say it's possible but not likely to be that significant.

Our next question comes from Ross Muken with Deutsche Bank.

On the Asia x Japan business, obviously tough comp in the quarter. As we sort of move into Q1 with the Chinese New Year a little bit earlier this year, do you have sort of comfort in sort of stabilization acceleration in that business based on sort of the order patterns we sort of ended the quarter with x some of those onetime headwinds from last year? And are we seeing that -- any confirmation of that in Q1 so far?

I'd say as we look at the base of comparison and the pace of business in Asia, we're pretty comfortable that we're back to our more traditional growth rate in that region of the world. We've got a year-end spend in India that we expect to see come through and the base of comparison in China's easier. So the expectation is for meaningful growth coming out of that region of the world pretty early in the year.

Were you at all surprised by the magnitude of sort of the strength in late December? I mean, I know the world was sort of an odd place from the summer through the early fall to winter just from a uncertainty perspective. But it seemed like we've seen some decent follow-through in the month of December in terms of re-acceleration. Were you kind of surprised by that on the capital equipment side at all?

I wouldn't say we were terribly surprised. I think the fourth quarter, always when completing the year you're -- you want to finish strong, but there was nothing remarkable, I don't think, that went on in the fourth quarter. I know there was some cautiousness on the part of observers of the industry, but we didn't -- the quarter was well balanced, interestingly. It wasn't like we saw late strength in any particular area that pulled out the quarter, so I think the balance is kind of what's notable in the results.

And just lastly, John, what are the rates you're using for the FX cal? Because we're getting Q1, as well as the year, even on current rate, something, I think, a bit less of a headwind than sort of what you provided.

I'm using the euro at somewhere around 128, 129; the yen, somewhere around 77; and the pound around 153. There are a basket of other currencies throughout the world that we do consider. These are the major currencies, but there are Canadian dollar, the Aussie dollar. There's other places that need to be considered. And I'm coming up with kind of a weak 2% effect in the first quarter, pretty full to a 2% effect for the full year, Ross.

Our next question comes from Dan Leonard with Leerink Swann.

What scenarios for government funding are in your forecast? Do you assume something like an 8% cut to the NIH budget? Or are you assuming something less than that? If you could just walk me through that.

The NAIH -- the NIH budget isn't all of that important to our run rates, Dan. It's -- Oh, Christ, John, what's the amount that's directly...

$15 million or so direct. As a percent of our business, 2 at the very most. You try to roll in as best we can.

Yes. And government spending overall, yes, is not that -- but it's clearly an area of cautiousness. I mean it's -- particularly it's an area of not only in the U.S. but in Japan and in Western Europe. So we are anticipating that, that is going to be slower next year than we saw this year, and it's probably going to be more flattish than anything else.

Okay. And then just one quick follow-up. What are your expectations from your generic customer base given that we're in peak year of the cliff here? Do you expect they're going to continue buying as usual? Or did you see anything like a big bump in orders in advance of the genericization cliff that maybe will present a tough comp?

Well, I think you're really going to -- we think about the generic business kind of in 2 parts. A big part being in India and another big part being almost everywhere else. Some of it within big pharma companies. Some is independent, stand-alone generics. Clearly in India, we saw a slowdown in the fourth quarter that our accounts tell us is solely due to the weakness in the rupee and the need to recalculate their budgets and redo their capital. They're highly optimistic about returning to a significant growth phase as we go into 2012. We've seen that kind of behavior before, and we believe that, that's going to happen. If you look at the rest of our generic business, it was a good year in 2011. I see no indication on the part of those accounts that they've stopped investing for the future. And I think we're pretty confident as these accounts look at the productivity capabilities in UPLC that this is another area where the move to UPLC is likely to continue and offer us growth opportunities going forward. So overall, I'd say generics look good for 2012.

Our next question comes from Amit Bhalla with Citigroup.

I wanted to get a little bit more color on the industrial chemical business segment. You talked about Europe and U.S. having slower growth. Can you put some numbers around that and give us some detail about how you're thinking about that segment in 2012?

Yes, I think we're a little bit cautious as we think about Western Europe and maybe a little bit of impact associated with a lower GDP in that region of the world. So we've seen, across this year, relatively strong growth in our industrial business including reasonable growth in that geography. We think we might see that business in Western Europe slow down. I think offsetting that to some extent is we have some pretty good confidence that with the TA division, there's a number of products that are recently introduced and others that are coming that will continue to drive growth at least in their portion of that industrial segment. So seeing it move to a mid-single-digit growth from a double-digit growth or a high-single-digit growth is probably a reasonable way to think about that business as we think about a 6% to 8% business overall. I'm not including in that food safety and other applications that I think will grow faster, but the segments that go to the Dows, DuPonts the 3Ms and their equivalent counterparts overseas are likely to be under a bit more pressure, we feel, in '12 as we move forward.

I think the good news is that those accounts generally are in good financial condition. They have improved their balance sheets, improved their earnings. So that might be an area where the results exceed our expectations coming up. Certainly, TA, you might consider is a little bit of a canary in a mineshaft, the kind of a high preponderance of business in those industrial accounts, particularly polymer application. And there's no real signs of slowing there. So that might be an area where we prove to be a little more conservative than the actuals.

And just a quick follow-up, John, on the SG&A, can you just talk a little bit about the cadence for the year? Should it be flat throughout given the investments you've already made? Or are there any particular quarters where we should expect any bump ups in the absolute SG&A expense for 2012?

No, I don't think there's anything from a base of comparison that's, that difficult. I think you'll see SG&A track the sales growth minus 0.5 point to maybe 1.5 points difference in growth rate, if you will, across the year. So I would not expect to see major deltas by quarter as we think about the 4 quarters of '12 versus '11.

We did ramp up SG&A a little bit across 2011, so the comparisons are a little bit tougher in the first quarter and easier in later in the year.

Yes, but not dramatically so.

Our next question comes from Tycho Peterson with JPMorgan. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: Just following up on some of the pharma questions earlier. Obviously, you saw some nice momentum here in that business. You talked about it growing faster than the overall business. Given where we are in the QA/QC adoption cycle for ACQUITY, why couldn't that continue to outgrow the overall business? I think your comment before was that could be closer to flattish for the year for large pharma.

No, I said large pharma -- let me repeat myself. Large pharma overall in the fourth quarter was flat growth, but it -- we did show incremental revenue from those large pharma, that we're talking the top 15 to 20 account sequentially during the year. So fourth quarter was the biggest quarter of the year, but it often is. So -- and pharma all in for the fourth quarter grew at the corporate average. So those are the facts. H-Class, for both the quarter and the year was the fastest-growing LC in our business, and the fastest-growing applications for H-Class were in small molecule QC, so just so we understand our factual situation. Now we think H-Class is going to continue to grow faster in those applications. It's really a question in pharma as to where the balance of that business comes in next year, R&D spending across the base of big accounts, generics and other biotech accounts. So right now, we're saying that, that's likely to be at the corporate average next year. If we see stronger penetration in the H-Class across the small molecule world, that's likely to be a benefit. But that's what we've got modeled in our expectation for 2012. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: And are you seeing interest from customers for standardizing on H-Class? I know you had some customers previously standardize on ACQUITY before you launched H-Class, so just wondering if you're seeing that as well.

I'd say we're seeing customers standardize on ACQUITY UPLC technology. We have some very clear examples of that. That may mean that they're using I-Class in research applications with mass spec, and they're using H-Class. We're still seeing a kind of powerful story for these accounts who have traditionally used HPLC in their quality control who like the idea of buying H-Class, being able to use it for their traditional methods with their traditional chemistries, as they take a longer time to upgrade to true UPLC applications. What's interesting is we really are seeing them migrate to UPLC applications. It's all a question of the pace and the momentum that, that builds. But I think the evidence is pretty strong that, that's the direction they're going in. Tycho W. Peterson - JP Morgan Chase & Co, Research Division: And then you guys recently announced the partnership with Tecan for clinical assay platforms, obviously using your existing technology. But just talk a little bit how you're thinking about the clinical opportunity going forward that you've obviously touched on in various parts of the mass spec business previously.

Yes, I think the clinical applications are an interesting area. I'd say in the last several years, we have devoted more time and attention to clinical applications than we have historically. We've been particularly successful, I'd say, in providing systems for clinical monitoring in the anti-rejection, immunosuppressant marketplace. We're seeing good success in vitamin D analysis. And as we've gotten more intense in those areas and we've built our organization up, we've looked at more opportunities to utilize particularly the power and the broad-spectrum capabilities of mass spectrometry to penetrate into areas that more traditionally used other diagnostic tests. So I would say, we're investing pro-rata more in that area. We think there are many opportunities. It's a very broad category, monitoring of pain medications, forensic analysis. It's -- when we talk about clinical, it's a broad area. And I'd say overall, you'd see that area of our business grow faster than average over the next 5 years.

Our next question comes from Jon Wood with Jefferies. Jon Davis Wood - Jefferies & Company, Inc., Research Division: John, can you walk us through the cash assumptions in your modeling for '12, so specifically operating cash flow, CapEx, both the base level and whatever you're going to do on the micro mass facility and then your base assumptions for share repurchase, please?

Sure. Well, we think our net cash flow is going to be somewhere in the $500 million of free cash flow, if you will, after CapEx. CapEx is probably going to be somewhere around $75 million. Now that does not include capital that we'll deploy on the Manchester facility, which is likely to be somewhere between maybe $30 million and $35 million, depending on how quickly construction begins. As it relates to the share repurchase program, the guidance that I've provided contemplates share repurchases at about $70 million or so a quarter across the year in equivalent, but it's across the year. So about $280 million, $300 million or so in free cash flow procured evenly across the quarters for the year. Jon Davis Wood - Jefferies & Company, Inc., Research Division: Okay, great. And then the little acquisition you guys did in the third quarter, the contribution there, it basically rounds to 0, correct, on kind of the growth rate for '12?

Yes, yes.

It's de minimis. Jon Davis Wood - Jefferies & Company, Inc., Research Division: And then, Doug, any comments just on the acquisition pipeline as it stands today? Are there more Anter-type acquisitions in the pipe? Or is there a midsized deal you see 6 to 12 months out? Just any commentary you can give us on...

Yes, I would say more on the Anter, slightly larger sized, but not medium sized. The ones we're talking about range on the revenue line from $5 million in revenue to maybe $15 million to $20 million in annual revenue, and we're tending to be more successful on the smaller ones and they've done very well over time for us. So we like to continue it, and we like the risk profile. And we'd love to do a $50 million one that was just as good, but those are harder to find.

Our next question is from Peter Lawson with Mizuho Securities.

Doug, the slightly less than expected EPS guidance for 2012, is that mostly driven by the top line uncertainty or of -- in those difficult comps in one -- in the first half or the negative effects from FX on the P&L?

I'm sorry. I didn't get the full gist. The slightly lower guidance for 2012, is that -- I'm sorry, I didn't get the implication.

Oh, and what are the moving parts there? Is it the top line uncertainty, the difficult comps in the first half or negative effects from FX on the P&L?

The biggest change -- we see 2 dynamics, I'd say. We're a little more cautious about the university and government piece of the business, worldwide and the significant change in foreign currency year-over-year. And the foreign exchange, a 2% change. While we're relatively well hedged compared to a number of companies worldwide, there's no question that a stronger dollar does negatively affect our results. An estimate of how much that affects us next year's probably in the $0.10 range versus 2011. Is that's right, John?

$0.10 versus a flat currency scenario. So it's about $0.05 per point roughly. I mean, that can vary depending on which currency. But I would tell you that if we were talking about 6% to 8% growth with no currency impact, our earnings would be $0.10 or so higher than what we've described.

Got you. That's really helpful. And then the CRO strength, was that U.S. strength or emerging market?

That's worldwide. I'd say we saw a real strength in Western Europe, but generally, it's a common dynamic in our business that the CROs were strong.

Got you. And then just use of capital, is there a high likelihood of expanding that buyback program and the potential pacing at the existing buyback?

Well, it's been true for about 9 years now. So I see no reason why it's not likely to be true. It would be unusual in the extreme for us to do significantly less than that. If there were a large meaningful acquisition on the horizon, which we don't see, that would change things. But absent an unusual transaction, we would continue to deploy cash to buy back our stock.

Our next question comes from Derik De Bruin with Bank of America.

So I just want to dig in a little bit on the academic stuff. So John, you said or, Doug, you basically said that you had strong G2 sales to your academic customers in Q4. Were the orders placed -- everything's off the map on September it sounds like for a lot of the companies. Were the orders placed for the G2s that you shipped in Q4, were those placed prior September? Or were they after September? I'm just trying to see if we're seeing -- whether we're seeing order growth in the academic markets late in the year.

There's some of each, Derik. There's no doubt though that we ended -- we went into Q4 with a very meaningful backlog on the G2. We booked orders in the fourth quarter as well that we were able to satisfy, and we booked orders in the fourth quarter that are now in backlog leading into Q1. So just the fact that the product was slow coming out of manufacturing that we did build up a meaningful backlog both in the second and third quarter for that product though in particular.

, For the last 2 years, you've grown R&D over 9%. How should we think about R&D growth for 2012? It sounds like -- I mean, you've done some major product introductions. I would expect to see some moderation.

Yes, I'd say we're going to continue to spend on R&D as we need to. I would say that it's likely be closer to growth in sales than SG&A. It's possible in a quarter or 2 that you'll see as growing a bit faster than sales. Overall, we're not looking at changing in a meaningful way the percent of R&D, for some sales that R&D represents. But there will be some new products that will require some project expense. That's a little bit lumpy that you'll see across the quarters, but you're not talking about millions of dollars. You're talking $1 million perhaps in one quarter that's a little bit out of place versus prior year growth rate in one particular quarter that approaches 10%, for example, would be a pretty high expense in that quarter. So I don't think, in some total there's a lot of variability you'll see in our R&D spending as you think about this year versus history.

Great. And then just one final question. So I thought one of your more interesting product introductions in 2011 was the UNIFI system and just trying to integrate your CDS with your mass spec system. And how has that been received by the market? And I would assume that the bioanalytical was kind of the first launch with that. I assume that there's other ones coming with that. I guess, can you just talk a little bit about your -- what you're kind of seeing for uptick?

Yes, I think, what you've seen us do first with UNIFI is launch it on specific application systems. So regulated bioanalysis and bio pharm. When the UNIFI platform kicks in as a major dynamic is when it's launched as the full-service upgrade to our Empower, both single system and network system applications. That won't happen in 2012. So you're going to continue to see it operate as a powerful software platform on a specific niche product this year. The reaction has been very good, but I wouldn't have you believe that it has a major impact on our software business in 2012.

Our next question comes from Isaac Ro with Goldman Sachs.

This is actually Jeff, in for Isaac. Looking at the academic, government piece, you guys seem to be a little bit more cautious heading in 2012 than you were in 2011. I think one of the things you highlighted this quarter that was weak was Japan. Is the addition of Japan being another weak geographic area the source of the incremental concern? Or are you guys just kind of taking a more cautious approach?

I'd say it's just generally a more cautious worldwide approach given the fact that we're almost certain to see government budgets be more conservative going forward, not only in the United States but certainly in Western Europe and in Asia. So it's a broader dynamic rather than specifically Japan. In Japan, we've had tough conditions, particularly in our segments where government spending, if anything, was tilted more towards the effects of the tsunami and the earthquake rather than into more classical broad-based R&D applications. So we might actually see a little bit of benefit in Japan, but that remains to be seen.

And then kind of looking at it from the first half of this year and the second half versus what your outlook is for 2012, is it fair to say that your outlook is more cautious than what you experienced in the back half of this past year? Or is it kind of continuing the third quarter, fourth quarter run rate for the academic demand throughout '12?

Well, I'd say our outlook for the first half is influenced more by the strength that we saw in the first half of our business last year, particularly the first quarter. Our fourth quarter, again, a bunch of dynamics going on there, but our absolute growth rate in the fourth quarter was a little bit lower than our full year growth rate and so that we're not expecting our run rates to change significantly as we go into 2012, but we are a little bit more cautious. particularly on the university and government side of our business. Combined with tough comparisons in the first half, I'd say that's the most notable structural difference in our outlook.

I guess what I'm asking is from the fourth quarter what you saw in U.S. -- or global academic government to what you're expecting for the full year for 2012. Are you expecting a sequential deceleration?

Yes. We're thinking that government and academic could be flattish perhaps for 2012, and that's versus being up low- to mid-single-digit in 2011. So yes, we are thinking that it's possible that government agencies and the spend promoted by governments will be a little bit more pressured in '12 versus '11.

Our next question comes from Dan Arias with UBS.

Just wondering if this year we should expect some new products on the chemistry side for I-Class, and if so, what that might do for pricing or for margins on columns.

I wouldn't say anything unusual, but we will -- we're always introducing new flavors. But I wouldn't have you believe that a new platform introduction is imminent to affect that growth rate significantly, in really application-specific columns that are aimed as much as stimulating system sales as they are consumable sales.

And then, Doug, I know you've commented on pharma quite a bit, but I guess just briefly, a lot of what we're hearing on biopharma in '12 is related to sort of the prioritization of late-stage projects towards trials maybe at the expense of some early-stage stuff. So -- but presumably this is not a new phenomenon. So I guess from your perspective, is there anything different about what you're hearing in the way that you're -- or the way that you're viewing to '12 versus '11 relative to project preferences?

Well, I think, certainly what one of the strongest application areas that we've seen in the second half of '11 is in biopharmaceutical QC. And that's, as you know, a much different animal than the typical QC applications for small molecular weight drugs. It's in some ways, more art than science there, but it's getting more refined and clearly demanding more advanced technologies like higher-end LC/MS. So we've been very gratified to see that our offerings in that biopharmaceutical world has been very well received. I think that is highly likely to continue through 2012. But I also think that particularly with monoclonal antibodies, a lot of research going on, a lot of that research pound for pound takes more higher-end analytical instrumentation than small molecule drugs. So I think that general dynamic works in our favor.

Our next question comes from Sung Ji Nam with Cantor Fitzgerald. Sung Ji Nam - Cantor Fitzgerald & Co., Research Division: I just have 2 very quick ones. John, going back to growth margins, longer term, is there further headroom for growth aside from volume leverage? Or is it largely driven by product mix at this point?

Well, we've ended up over time with a manufacturing strategy that has moved products into Ireland, has moved products into Singapore, and across many years, we've been able to take advantage of that, both from a product cost perspective as well as a tax rate perspective. And I would tell you that right now, that program is pretty much complete. The businesses are growing with volume, but there aren't large numbers of products that continue to be ramped up to move into those lower-cost jurisdictions. All of that being said, when the business grows in the high-single digits, you're right. There's still volume leverage to be had, and thinking about the business, having 10, 20 basis points of gross margin expansion through the leverage of a fixed base of manufacturing cost is still true. We're a little cautious in stating that to flatly this year just given the fact that the lower end of our range perhaps doesn't provide all of that, and FX is a bit of a headwind this time. So I wouldn't say that the gross margin expansion party is over. Certainly, large leaps in the expansion are as a result of product transfers but small incremental movements with volume, which we continue to see as time goes forward. Sung Ji Nam - Cantor Fitzgerald & Co., Research Division: And Doug, you mentioned in terms of the I-Class platform, primarily going as a front end to your research-based mass spectrometers. What component of that -- is it coming from product replacements of your legacy UPLC platform? And overtime, I would -- my question is what percentage of your overall legacy UPLC platform do you anticipate to be replaced with this I-Class platform?

I think that's a very fair question. I think, currently, we'd say that I-Class is probably replacing classic ACQUITYs. And over time, you're probably going to see most of that research-grade ACQUITY translate from classic ACQUITY more to the I-Class. I think that will take a while. Certainly, we're pricing the I-Class at a premium to the classic UPLC, and we think that makes the most sense right now. But over time, those systems are likely to come together. Well, thank you all for being with us, and we appreciate high quality of questions and the interest. And we look forward to talking to you all again at the end of the first quarter. Take care.

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