Gregg Sengstack - Chairman, CEO John Haines - VP, CFO Robert Stone - SVP, President International Water Systems.

Ryan Connors - Boenning & Scattergood Inc. Ryan O'Donnell - Robert W. Baird Edward Marshall - Sidoti & Company Ryan Cassil - Seaport Global Securities Matt Summerville - Alembic Global Advisors.

Welcome to the Franklin Electric Co., Inc., Fourth Quarter and Fiscal-Year 2016 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host for today, John Haines, Chief Financial Officer. You may begin..

Thank you, Sonya and welcome, everyone, to Franklin Electric's fourth quarter 2016 earnings conference call. With me today are Gregg Sengstack, our Chairman and Chief Executive Officer and Robert Stone, the Senior Vice President and President of our international water systems unit.

On today's call, Gregg will review our fourth quarter business results and then I'll review our fourth quarter financial results. When I'm through, we will have some time for questions and answers.

Before we begin, let me remind you that as we conduct this call we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, many of which could cause actual results to differ materially from such forward-looking statements.

A discussion of these factors may be found in the Company's annual report on Form 10-K and in today's earnings release. All forward-looking statements made during this call are based on information currently available and, except as required by law, the Company assumes no obligation to update any forward-looking statements.

During this call, we will also discuss certain non-GAAP financial measures which the Company believes helps investors understand the underlying trends in the Company's business more easily. A full reconciliation of non-GAAP to GAAP financial measures is included in today's earnings release which you can find on Franklin Electric's website.

With that, I will now turn the call over to our Chairman and Chief Executive Officer, Gregg Sengstack..

Thank you, John. The fourth quarter of 2016 rolled out in line with our expectations, with overall organic sales growth of 10%. Water systems organic sales growth of 9% was led by double-digit growth in North America. Sales in Latin America, including Brazil, continued to grow organically at a mid single-digit rate.

Sales in Europe, the Middle East and Africa also grew a healthy 9%. However, record local currency sales in Turkey were muted in U.S. dollars, due to the weakening Turkish lira. In Asia-Pacific, we continued to post record sales, up 3% over a strong comparable for 2015. In the U.S.

and Canada, water systems sales were up about 13% compared to the prior-year fourth quarter. In the fourth quarter of 2016, sales of groundwater company equipment grew by about 18%, with significant increases in sales of products for both residential and agricultural applications. We believe there were three reasons for this strong finish to the year.

First, we had an easy comp to 2015, due to weather. Second, as the industry was having a better year, distributors stretched to achieve annual sales goals. And third, we have recovered and, in some regions, increased our market share.

In Brazil, our second largest single-country market behind the U.S., our team continues to grow the business and achieved another solid quarter in a tough economic environment with less-than-favorable weather conditions. Our business in Europe is steady and growing, with our focus on expanding our distribution footprint.

In the Middle East and north Africa which includes Turkey, where we again had record results, the stabilization of world oil prices led to a recovery of our business in oil-producing nations. Southern Africa remains depressed, as we continue to experience weak end-market demand in the industrial and mining sectors.

Strength in southeast Asia continues to drive our Asia-Pacific results, even as the drought appears to be breaking there. Our fueling business delivered a record quarter. Sales were the highest for any quarter in the segment's history and earnings were a record for any fourth quarter. The fueling team delivered 13% growth in the U.S. and Canada.

Major marketers that specified Franklin are actively building use stations and our team continues to convert other marketers to Franklin and earn additional incremental business. The international fueling business recovered from the third quarter sales decline by delivering growth of 5%.

This growth was across all regions and product lines except for Europe, where our tank business continued to experience weak end-market demand. Overall, 2016 came in pretty much in line with our original expectations, with organic sales growth of 5% and earnings of $1.66 per share. For the year, we experienced a nice recovery on our U.S.

and Canada water business. We had record sales in Latin America. Business in Europe was steady. Business was choppy in the Middle East and Africa. In Asia-Pacific, we had record performance and, again, for 2016 our fueling business posted record results, with strong growth in the U.S. and Canada leading the way.

Despite a meaningful amount of global uncertainty due to the current political and economic climate, our outlook for 2017 is positive. We currently see the Company's total net sales increasing in the 3% to 5% range overall, despite our current assumption of about a 2% currency translation headwind due to the strengthening U.S.

dollar versus many key international currencies, most notably the euro and Turkish lira. We expect our organic growth, after considering foreign-exchange impacts, to be in the range of 5% to 7%.

We expect our 2017 adjusted earnings per share to be between $1.77 and $1.87, after considering foreign-currency translation will impact our adjusted earnings per share by about $0.04 compared to 2016. I will now turn the call back over to John.

John?.

Thank you, Gregg. Our fully diluted earnings per share as reported were $0.37 for the fourth quarter of 2016 versus $0.33 for the fourth quarter of 2015. As we note in the tables in the earnings release, the Company adjusts the as-reported GAAP operating income and earnings per share for items we consider not operational in nature.

Non-GAAP items for the fourth quarter 2016 were $0.7 million and included $0.3 million in restructuring costs, primarily from Brazilian manufacturing realignments and $0.4 million of other non-GAAP expenses, of which $0.3 million was related to retired executive pension costs.

The fourth quarter of 2016 non-GAAP adjustments had a net EPS impact that reduced earnings by $0.01.

Non-GAAP expenses for the fourth quarter 2015 were $0.9 million and included $0.5 million in restructuring costs, primarily for the Brazilian manufacturing realignments and $0.4 million of other non-GAAP expenses, $0.3 million of which was retired executive pension costs and $0.1 million related to business realignment costs, primarily severance and targeted fixed-cost reduction actions.

The fourth quarter of 2015 non-GAAP adjustments had a net EPS impact that reduced earnings by $0.02. So after consideration of the non-GAAP items, fourth quarter 2016 adjusted earnings per share is $0.38 versus the fourth quarter 2015 adjusted earnings per share of $0.35, an increase of 9%.

Water system sales were $177.8 million in the fourth quarter of 2016, an increase of $14.6 million or about 9% versus the fourth quarter of 2015 sales of $163.2 million. Water systems organic sales growth was also about 9% compared to the fourth quarter of 2015, as the impact of foreign-currency translation was not significant.

Water systems operating income was $22.6 million in the fourth quarter of 2016, up $2.6 million or 13% versus the fourth quarter of 2015 as reported and up $2.3 million or 11% versus fourth quarter of 2015 after non-GAAP adjustments. The fourth quarter operating income margin was 12.7%, up 40 basis points from 12.3% in the fourth quarter of 2015.

The fourth quarter operating income margin after non-GAAP adjustments was 12.9%, an increase of 30 basis points from the 12.6% of net sales in the fourth quarter of 2015 after non-GAAP adjustments.

Fueling system sales were $61.8 million in the fourth quarter of 2016, an increase of $5.7 million or about 10% versus the fourth quarter of 2015 sales of $56.1 million. Fueling system sales decreased by about $0.7 million or 1% in the quarter, due to foreign-currency translation.

Fueling system sales increased about 11% after excluding foreign-currency translations.

Fueling systems operating income was $15.4 million in the fourth quarter of 2016, up $1.3 million or about 9% compared to $14.1 million in the fourth quarter of 2015 as reported and up $1.4 million or 10% compared to $14.1 million after non-GAAP adjustments in the fourth quarter of 2015.

The fourth quarter operating income margin was 24.9%, a decrease of 20 basis points from the as-reported 25.1% of net sales in the fourth quarter of 2015. The fourth quarter operating income margin after non-GAAP adjustments was 25.1%, flat from the 25.1% of net sales in the fourth quarter of 2015 after non-GAAP adjustments.

The Company's consolidated gross profit was $81 million for the fourth quarter of 2016, an increase of $11.9 million or about 17% from the fourth quarter of 2015 gross profit of $69.1 million.

The gross profit as a percent of net sales was 33.8% in the fourth quarter of 2016, an increase of about 230 basis points versus 31.5% during the fourth quarter of 2015. The gross profit margin increase was primarily due to favorable pricing, lower direct material costs and fixed-cost leverage from higher sales.

Selling, general and administrative expenses were $55.5 million in the fourth quarter of 2016, compared with $45.1 million in the fourth quarter of the prior year, an increase of $10.4 million or about 23%. Roughly half of the Company's SG&A expense increased in the quarter or about $5 million, was due to higher variable compensation expenses.

Marketing and selling related expenses increased about $4.5 million to support sales growth and research, development and engineering expenses increased by $1.1 million in the quarter.

As you look at the income statement below the operating-income line, other expenses in the fourth quarter of 2016 include the reversal of an indemnification receivable related to a contingent tax liability for $1.9 million, recorded at the time of a foreign acquisition.

A similar amount was also reversed and the benefit was recorded in the income tax provision.

The tax rate as a percent of pretax earnings for the fourth quarter of 2016 was about 18% after discrete events, primarily due to the favorable impact from equity compensation share-base payments and the reversal of a contingent tax liability, offset by adjustments to the Company's valuation allowance against certain states deferred tax assets that are not likely to be realized.

The tax rate as a percentage of pretax earnings for the full year of 2017 is projected to be in the 25% to 27% range. The Company ended the fourth quarter of 2016 with a cash balance of $104.3 million which was about 28% higher than at the end of 2015. The cash balance increased primarily due to higher earnings.

The Company generated about $115 million in cash flows from operations in 2016. The Company had no borrowings on its revolving debt facility at the end of either 2016 or 2015. The Company did not purchase any shares of its common stock in the open market during the fourth quarter of 2016.

As of the end of the fourth quarter of 2016, the total remaining authorized shares that may be repurchased is about 2.2 million. This concludes our prepared remarks. We would now like to turn the call over for questions.

Sonya?.

[Operator Instructions]. Our first question comes from Edward Marshall of Sidoti & Company. Your line is now open..

So I'm curious how you see the 3% to 5% sales growth playing out at the segment level for both water and fueling into 2017..

It's not totally different than what we've talked about. The 3% to 5% is, of course, considering certain FX assumptions that we have. At the beginning of the year, those could always change. But -- fueling should be a little bit higher in total. We're thinking of fueling more as we've talked in, call it, 6% to 8% or even better.

International water units, as we've seen, might be a little bit better than the 3% to 5%. The mature market water units, like Europe, North America, are more in that range, so really our outlook is more tempered by an FX view than it is really anything else.

We feel pretty positive about the momentum we have entering 2017 in most -- maybe not all, but in most of the end markets we're competing in..

Got it. Within the discussion of gross margin, at least in the comments in the release, you talked about lower material costs as a positive for the gross margin in the fourth quarter.

Can you talk about what maybe those materials were that you saw the benefit from? And do you plan that that might continue?.

As the material -- remember that the material cost that passes through our cost of goods sold is on a three- to four-month lag, right, so it's an input cost, say, in early third quarter or mid third quarter. It turns to an output cost or a cost of goods sold charge in the fourth quarter.

So the materials that we're seeing inflation on which I think is really what your question is, is really in a lot of the fuel categories, stainless steel, cold-rolled steel, certainly we're seeing inflation there. We've seen inflation on copper, for sure. We've seen inflation on purchased components.

One of the key purchased components that we have are finished motors that we then attach to our pumps in many of our surface-pumping products. So we're anticipating inflation as we roll into 2017, both on an input and an output basis. On an input basis, right now we're thinking somewhere in the 225 basis-point range.

When we look at the basket of products that we're acquiring as we enter 2017, there's a lot of assumptions with that.

And now, we can make some of that up, we think, with sourcing improvement project and value improvement projects, be it either sourcing or engineering, but we're going to need to get some price which we feel pretty confident in our ability to do, to offset some of that inflation headwind as we enter 2017. So that's kind of the view of it right now..

Do you think you'll capture all of that within price? You've seemed to do a pretty good job of that recently..

Yes, we do, Ed. We think we can get all of that net inflation offset with price..

Good. I want to talk about maybe the cadence, too and this will be the last question. But you talk about some stocking from the distributors; they wanted to make some of the rebates in the fourth quarter. I'm kind of thinking about the first quarter and what that might mean from a performance perspective.

Could you kind of talk about maybe what you anticipate and maybe how January and, I guess, most of February has trended so far from you at the distributor level? Maybe talk about the cadence for 2017 as far as the earnings profile..

Sure. Again, Ed, we've really moved away from doing quarterly guidance, but we can talk about the business broadly. And you're talking specifically to the U.S. groundwater market and so to the degree that people buy up in the quarter, the fourth quarter, that's obviously going to put some dampening on the first quarter.

To the degree that it's been wet -- it's been well documented that it's been very wet out west and through the central part, that may slow things down.

Of course, that could also set us up for -- depending, again, how the weather patterns dry out or change over, if it dries out over the middle of the quarter, that can start -- people start prewatering for planting, but that's normally to that more April/May time frame. So it's a little tough to call. It dices that thinly here in the U.S. market.

More broadly, we don't see that kind of volume change year to year. If you go around the globe, in Europe you don't see that kind of cyclicality. You just have normal seasonality. We did see very strong buying in Turkey towards the end of the year.

I suspect that will make things a little slow at the beginning of the start for Turkey, but, again, we've been more -- our results in Turkey have been affected more by currency than anything else. And you look at other markets. It's summertime down in the southern hemisphere, so that business continues to do well.

So it's a little tough to parse it out, but to your specific comment to the U.S. groundwater market, people bought and, depending on how the market rolls out in the first quarter or second quarter, how the weather rolls out, that will determine the quarterly results..

Our first question comes from Ryan Connors of Boenning & Scattergood. Your line is now open..

I want to just kind of remain on the same theme there a little bit and just get into the competitive dynamics, especially around the agriculture space.

I know, Gregg, that you mentioned an easy comp and you mentioned some share gain, but it really does seem like the growth you are able to achieve here in that market is bucking a broader trend of pressure out there in that market.

So can you just kind of give us some color on why you think that is to that magnitude?.

Yes and, again, it is those three themes. Let's face it, 2015 was -- volume at that time was the third best year in Franklin's history. It was not a strong revenue year, particularly in North America. It seemed a long time ago, but we had the second wettest second quarter in U.S. history. There was little demand.

We saw the general kind of decay in the farm prices. Not a lot of emphasis for people putting out new installations. Of course, we have a very large replacement market which is what helps us go through some of these low points. But we've kind of worked through that.

We've worked through some distribution changes and so we saw 2016 as unfolding as gaining momentum through the year, based again on easier comps, based on our continued focus on this channel. This is what we do. This is Franklin's home base and we saw that in -- we have limited information on share numbers, but we saw that through some share gains.

So, we really finished the year very well and we just will come into 2017 and see how this year unfolds. Yes, crop prices have been down. They are coming up maybe a little bit. Yes, we've been in a three-year decline in farm income. Don't know where that's going to go.

But, again, we have this replacement basis out there and a commitment to this industry, so I think all that sets us up to be in the position we're in..

Got it. And then, I had one other somewhat of a housekeeping question for John, actually. Deferred tax liability numbers, I see it at about $40 million which is not an immaterial number.

Can you talk about that in the context of the potential tax system changes we might get from the new administration, whether that's -- there are folks out there saying that anybody with a sizable deferred tax liability, that's potentially a pretty nice tailwind, so can you give us your context on that?.

Ryan, we've been watching, obviously, what is being discussed and bantered about very carefully. I can't say that we've necessarily tried to associate it to specific liabilities or assets that we currently have on our balance sheet.

What I can say more broadly relative to some of the discussion that's happening is that we're a net exporter from the United States, so we export more product out of the United States than we import into it and based on what we understand, we would view efforts to lower the statutory federal income tax rate, exempting exports from the U.S.

from federal income taxes and potentially new rules regarding the repatriation of earnings from overseas operations all as positives, based on what we read in here.

However, new tariffs, border taxes, the elimination of deductions for federal tax purposes of the cost of imported goods into the U.S., along with the corresponding retaliation that other countries may exercise on goods they import from the United States, are all negatives.

So net-net, some of the math we've done again ties to being a net exporter is positive, but this is all conjecture at this point in time. There is a lot that needs to be sorted through and I think that last quote I make there relative to how others may respond to this is a really big unknown.

So on the surface here, you could say, wow, this is all great, until somebody in Europe starts taking some different actions or Asia-Pacific which we export into or really any other part of the world which we export to. So, that's kind of our current thinking on that..

Our first question comes from Ryan O'Donnell of Baird. Your line is now open..

So just starting on the water side, I know you guys mentioned offsetting some of the commodity increases with price.

Have you guys gone out with that price increase and is there any potential for stocking ahead of that as well? Was that seen in the fourth quarter or still kind of ahead of us?.

We have in most of our end markets announced price increases. Depending on the amount of inflation and the actual FX [indiscernible], there may be additional price increases. But generally, those price increases are announced late or early in the year. It's hard to say if some of that -- if you can attribute some of the U.S.

growth specifically to those announced price increases.

As Gregg said, we would think that more of it was really driven by the fact that 2016 was a much better year and that many of these distributors who were on volume incentives were closer to achieving those volume incentives and therefore would stretch up, but were coming price increases in their thinking? They may have been as well..

And then on the fueling side, just thinking about kind of the cadence through the year, do you guys expect any impact from the pushout of the EMV regulations here in the U.S.? And then, internationally, obviously a pretty lumpy project business. Just curious how China and India are looking into 2017..

Ryan, to your first question, it's been interesting because one could say that EMV is helping to drive business and one could say EMV is taking capital away from our business. Let me give you two examples.

If you have a gas station where you are looking and say, okay, my dispensers are at an age, my station is at an age, I'm going to do a whole basic ground-up from the tanks updated station. We're going to benefit from that.

And with generally the lower price of fuel, people have less working capital tied up in their stations and they say, okay, I have the capital to be able to do stations like that and that would be generally good for us.

The flipside is you say, okay, really what I'm going to do is focus on dispensers and so focusing on dispensers and I'm not going to do the rest and so spending on EMV and that would maybe take away dollars from the underground or from doing others.

So pushing this out for us, I think, would be actually kind of a net benefit, but it's really tough for us to have visibility to each upgrade as to what's driving the decision. We have just a number of marketers who are expanding their footprints.

They are consolidators and it's a good climate and they are just investing and that's where we're getting the growth. So I don't get a lot of feedback from our team that says that EMV is really moving the needle much either way for what we're doing.

Outside the U.S., to your point, it's been lumpy and while we're getting some confidence with the stabilization of oil prices, outside the U.S.

the model is very different because, as opposed to major marketers that we have in the United States, outside the United States you see a lot more gas stations are owned by oil companies and when the price of oil is down, they are not spending.

They are not spending on infrastructure or in their gas stations and in countries that there's a lot of companies where there is oil aren't spending on other structure -- that's why we saw in our water business, for example in Saudi, we really didn't see a whole lot of business out of Saudi for about nine months as they kind of just got readjusted to the new oil price.

If you take that over to the fuels business, you just see that the oil companies took their foot off the pedal and so we had a very flat year after currency outside the U.S.

Now, we do think that our premise remains -- will be shown to be true and that is that when you are in developing regions, that's where the people are and that's where the infrastructure needs to be. And so, as the price of oil stabilizes, we see that we're going to have a continued really high-growth business in our fueling business outside the U.S.

We're seeing India, we're seeing some very steady business coming out of India. We're winning tenders there and we're seeing our business in China has been improving, to get to your specific questions about India and China.

So, it was a flat year in 2016, but with oil prices stabilizing, we're seeing upside in the United States, we remain optimistic that our fueling business growth rates will return to historic levels..

Got it. That's great color and then last one for me, just on the capital deployment side as the cash flow remains strong. Any change to how you guys are looking at the M&A pipeline versus buybacks and just your thoughts on that? Thanks..

Really no change, Ryan. Continue to want to deploy capital on accretive acquisitions, that's our primary focus. Our CapEx situation will be a little bit better in 2017, we think, than it was in 2016, so maybe in the low to mid 30s.

Our view of share repurchases has not really changed; we're going to try to offset the dilution impact of forwards that we make, but we will be smart about that relative to price. So, the real focus remains on acquisitions and we continue to manage a pipeline and try to find the right value equation for Franklin..

Our first question comes from Matt Summerville of Alembic Global Advisors. Your line is now open..

I hopped on the call a few minutes after you started your prepared remarks, so I apologize if you've already covered this, but it sounded like there was some year-end buy-up in North America or in the U.S.

Is there a way for you guys to quantify that? And then, Gregg, you've talked in the past whether it be geographic region, i.e., Europe, maybe, with the deadline coming I believe in 2017 or 2018, but other country-specific sort of regulatory drivers that may influence your fueling business.

Can you speak to that again today in terms of what you're seeing there?.

Sure and on the question on the U.S. pro channel or space, again threefold. We had an easy comp. We had distributors that therefore they had better confidence they were going to hit numbers in 2017, so there was some buy-up for that. It's difficult for us to parse out what's end market and what's by inventory.

It seems to be okay to buy a little high in the channel, but again that's anecdotal. With respect to your question on fueling and regulatory initiatives, we're not really participating in the European initiative, per se. A lot of that's been done and it's been done [indiscernible] you talk about the vapor recovery initiative in Europe.

We're hearing some rumblings, some more rumblings out of India about doing something with vapor recovery more broadly.

But what we've found in India is that it often develops over a long period of time, so I wouldn't expect anything near term to happen, but we're getting some indications that they are very sensitive to the fact they need to do something about their air more aggressively and this is a low-hanging fruit and is a pretty straightforward approach to helping dramatically improve air quality in major cities through vapor recovery systems.

So, we're optimistic. We have systems that we can put in India that are at the right price point. The question is timing and I'd say that, generally speaking, I'd be cautious on getting too ahead of ourselves on India. .

And then, just a follow-up on pricing.

John, can you comment on what your price realization was across the Company in total in 2016 and what you are anticipating in terms of pricing in 2017?.

In 2016, across the entire consolidated entity, it was just over 200 basis points, Matt, a little more in fueling, a little less in water and our expectation for 2017 is it more in the 250 basis-point range..

Got it. And then, I guess back to one of your comments, John, regarding Franklin being a net exporter, I can sort of see that in the fueling business.

Can you talk about how you would be a net exporter in your water systems business? If indeed you are, can you talk about the relative balance you have there?.

Yes, fueling is certainly a key exporter. Many of the products that we sell globally are manufactured in Madison, Wisconsin.

The other key plant that we have in the United States on the water side, Matt, you may recall, is in Wilburton, Oklahoma, where a lot of the large-diameter motor and pump equipment that supports ag -- we're talking about encapsulated product here now on the motor side, six-inch and eight-inch -- is manufactured in that facility there and it is reaching end markets virtually everywhere around the world.

So those two are the biggest drivers of the export. We have not shared kind of a net water export versus a fueling export, but that's kind of the picture of where that's coming from here in the U.S..

Our first question comes from Ryan Cassil of Seaport Global. Your line is now open..

A lot has been covered here, but I think you talked about industrial and mining perhaps being weak in various regions.

Can you just give some general color on what you're maybe seeing there early in 2017 and if you think there's really more opportunity for growth there at this point versus more challenges ahead?.

On industrial and mining, it's principally in our developing regions and Robert has been -- as a matter of fact, he just came back from southern Africa, so I'll put the question to Robert..

Ryan, it's a little better than last year at this time. We're seeing some pickup in activity from the mines that we deal with in Africa, southern Africa in particular. Not much yet really in Australia or South America, so while it's a little better, it's only a little better..

Okay. Great.

So fairly muted assumptions, I guess, in the 2017 outlook for those businesses?.

Yes..

Okay. And then, lastly for me, anything you are seeing from a valuation standpoint with respect to M&A? I think people are feeling a little bit better about some of the end markets.

Are you seeing it in valuations, I guess, at this point?.

I'd say that what we're seeing is that there seems to be more interest both domestically and internationally to engage in discussions about -- around M&A. You see topline multiples for large public acquisitions.

We deal mostly in the private market, almost exclusively with private companies and I think people are looking at their business or looking at their own individual situations. Much of this is situationally related, so you have a transition between two generations. You have families that are looking to have a liquidity event.

That seems to be more of the driver than necessarily valuations. I don't know how much is on people's minds in the U.S. with potentially U.S. tax policy changes. I really can't get into the mind of sellers in that. But, generally speaking, we know the people we know in our industry. They are family businesses.

It's more driven by family events, necessarily, than strict valuation. John, you talk to the Street quite a bit. You have, I think, a broader view on that..

No, I would just say that I still -- I don't think internationally, Ryan, that it's changed a lot. I tie it back again to a strong dollar. Some of these international deals as we talked about are in another currency that's lost a lot of value to the dollar over, call it, 12, 18, 24 months, whatever it is.

And I think that meets people's enthusiasm for the transaction, just because they had an expectation of what they were going to net in proceeds and if their currency is down 15% to the dollar, then what they are netting dollar wise is less and I think that impacts how they think about the transaction..

Thank you. And ladies and gentlemen, this does conclude our question-and-answer session. I would now like to turn the call back over to Gregg Sengstack, Chief Executive Officer, for any further remarks..

Thank you for participating in our fourth quarter conference call. We look forward to speaking to you about our first quarter results in late spring..

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day..