John Humphrey - Chief Financial Officer Brian Jellison - Chairman, President and Chief Executive Officer.

Deane Dray - Citi Research Mark Douglas - Longbow Research Jeff Sprague - Vertical Research Matt Summerville - KeyBanc Steve Tusa - JPMorgan Christopher Glynn - Oppenheimer Richard Eastman - Robert W. Baird Alex Blanton - Clear Harbor Asset Management.

The Roper Industries' First Quarter 2014 Financial Results Conference Call will now begin. All participants are in a listen-only mode. Today's conference is being record. I will now turn the call over to John Humphrey, Chief Financial Officer. Please go ahead..

Thank you and thank you all for joining us this morning as we discuss the results of our first quarter. Joining me this morning is Brian Jellison, Chairman, President and Chief Executive Officer; Paul Soni, Vice President and Controller; and Rob Crisci, who heads our Planning and Investor Relations for us.

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 on our website at www.roperind.com. Next slide. So 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 further detailed on our SEC filings. You should listen to today's call in the context of that information.

Now if you'll please turn to Slide 3, today we will be discussing our income statement results for the quarter primarily on a GAAP basis. Prior period results are presented on an adjusted basis for comparison purposes.

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. Now if you'll please turn to slide, I will turn the call over to Brian Jellison, Chairman, President and Chief Executive Officer.

After his prepared remarks, we will take questions from our telephone participants.

Brian?.

Thank you, John. Good morning, everyone. So we'll go through the first quarter enterprise financial results first and then we'll take a look at the detail around each of our four segments and the outlook for those four segments for the second quarter and the full year as a total, and then what our Q2 guidance is.

As you know, we're raising our guidance here for the full year. And then have a Q&A session. So next slide. Here we'll look at the summary of the enterprise financial results. We had once again all-time records for orders and backlog. And revenue, net earnings, EBITDA, cash flow, everything at an all-time record level, really terrific quarter.

Revenue was up 13% with organic revenue up 7% and the book-to-bill was above 1 at 1.01. If you look at GAAP to non-GAAP numbers, they actually came at about the same at 13% revenue up. Gross margin was up 120 basis points to 58.6%. I hope you're shocked to see our gross margin.

And there's some reversion to a mean of those industrial companies that people look at. But we're not really an industrial company anymore and our 58.6% gross margin is in fact up 120 basis points. If you looked at GAAP to GAAP, it would have been up 140 basis points.

Our EBITDA was up 19% to $274 million and our EBITDA margin was up 180 basis points to 32.8%. If you looked at GAAP to GAAP, it would have been up 21%. Our earnings before tax, which is a really important number this time around, are up 24% to $205 million.

You may remember that a lot of people, ourselves included, in the first quarter of 2013 benefited from the expenders in the tax program and double-dip benefit on R&D tax credits and they'll benefit yet this year. And we had a discrete item this quarter that benefited us by $0.06 despite the headwind that we had.

Our operating cash flow was also up 24%. So the operating cash flow and the earnings before tax were virtually identical. Free cash flow was up 26% to $202 million. So it's a great start for the year. Next slide.

Here if we look at the income statement, you can see orders came in at $846 million, giving us a book-to-bill of 1.01 against the revenue of $834 million. I will talk about growth here in just a minute. The gross margin, as we said, was up 120 basis points. Operating income increased by 18.3%. On a GAAP to GAAP basis, it was over 20%.

Operating margin was at 26.8%, up 130 basis points. And the earnings before tax number was up 24%. As we said, the tax rate, you can see the difference here. Last year was 23.1%. This year, it's 28.2%. So that's 510 basis point headwind into the quarter compared to last year, but that was an unrealistic expectation.

And in fact, our 28.2% was a little bit better on the tax side than our guidance had anticipated. If you do look at 28.2% in common size over the first quarter of last year, our earnings would have been $1.18, not $1.27. And we compare that with $1.46, we're up 23%. Next slide.

On the EBITDA growth and margin expansion, our long-term sustainable trends continued. You see our trailing 12 months EBITDA is now at $1.118 billion. That's up 35% in the last two years from $830 million. Our trailing 12 months EBITDA margin is now at 33.2%, up 320 basis points from just two years ago.

And if you really want to see the power of our Roper business model and how the CRI tools work, all you have to do is go back to 2010 with our year-end EBITDA was at 26.7% compared to our closing year-end EBITDA this past year in 2013 of 32.8%. And you see 610 basis points of improvement.

And compare that to the S&P 500 on gross margins, which are around 28% in those periods. Next slide. If you look at our cash flow results, you see once again terrific results accelerating activity. We had $213 million in operating cash flow in the quarter, which was over 25% of sales. Cash conversion was 144%.

And on a free cash flow basis, we generated $202 million of free cash flow and conversion was 137%. We earned $1.46 on a diluted basis, but if you look at that conversion of 137%, you can do the math and see what the free cash flow per share was.

That's really a direct result of how great each of these individual businesses that we have really are and their ability to deploy our CRI tools and discipline to create these sustainable cash flows. As a percent of revenue, you can see free cash flow for the last 12 months has now been 24% of revenue.

We said in this year's annual report and repeated here in the takeaway that we believe cash is the best measure of performance. And I guess we're maybe as timely just put that on everyone of our slides that we believe cash is the measure of performance. Next slide.

Asset-light business model, well, just to demonstrate, even when you get these very low levels, there's room for improvement. If you look at the first quarter in 2012, our inventory was running 7.5% of sales. And here we are two years later at 6.3% of sales. Receivables have gone from 16.9% to 18.2%.

That's actually favorable, because unbilled receivables are in that number. And that's why we look at the deferred revenue aspect of things. Payables and accruals are at 18.2%. So they're up nicely, giving us the inventory plus receivables minus payables on accruals line there at 6.3% of revenue, down 320 basis points from just two years ago.

So for those people who think we can't continue to improve, we just want to demonstrate that the processes we have do create really unusual values. Next slide. Strong financial position, I think our press release indicates it's best in our history from a balance sheet viewpoint. Last May, we acquired MHA for $1 billion.

So we've been able to self-fund virtually that entire $1 billion acquisition during the course of the year. You can see our cash is now up to $503 million and an undrawn revolver of $1.4 billion. So we have $1.9 billion of immediate liquidity here. Our trailing 12 months EBITDA is up from $950 million $1.118 billion.

So the gross debt number EBITDA is about 2.1 versus 2.0 a year ago. After investing $1.07 billion last year, we would say that we would expect to do the same thing during the next 12 months, probably even a greater amount of investment here in capital deployment. Next slide.

We'll move here into the segment detail and look at each of the individual businesses. So next slide, we'll start with an overview of how widespread the growth was here in the quarter. On the left-hand side of this chart, you can see the organic growth by segment. Energy was up 5% and Medical & Imaging up 7%, RF up 8%, Industrial Technology up 9%.

Industrial Technology is primarily Neptune, including handling. About a quarter of Industrial Technology is actually industrial businesses that are instrumentation businesses. All the rest are really water, including handling.

In the RF segment, which was up 8%, that's really the toll business, our SaaS software businesses, are CBORD and Horizon legacy software businesses and then just a modest amount of products.

Medical & Imaging is really split between the medical IT business, which is the largest amount, the medical products business and some scientific instrumentation, a little bit of cameras. And in Energy, that 5% growth comes from about two-thirds of segment is energy related and one-third of that segment is really industrial related.

If you look on the right-hand side and you see the revenue by region, we actually had favorable organic revenue in every region in the world. The US, which is about 61% of revenue, in Canada which is about 6% of revenue came in at up 7%.

And then Europe, which includes Russia by the way, which is up 6% with Russia being a modest portion of the $125 million in revenue in Europe. Asia was up 9% with Japan and China being those two biggest areas. And the rest of the world was up 7%.

We report the Middle East and Africa in the rest of the world, which is a big portion of that total revenue. Next slide. By the way, currency, I should just mention currency currently is like 20 basis points. It was pretty much all in Canada, where it depressed our organic revenue. But as an enterprise, it was only at 20 bps negative.

So pretty much a neutral. Next slide, we'll look first here at the Energy Systems & Controls segment. That generated $37 million in operating profit on $155 million of revenue, which is almost 24% OP margin. The organic growth was up 5% that was led by our compressor controls continued to grow in Asia and in the Middle East.

We had very solid sales of new instruments for our refinery operations, which sometimes can be pretty cyclical. The Zetec performance improved, so it wasn't as big a drag on the business and we'll talk about that in a minute getting much better throughout the year.

And then our Advanced Sensors acquisition, which came in right at the end of last year, which was $50 million investment in offshore technology, is very interesting technology. The integration process is underway there and it will take through the second half before we turn that business into a more profitable entity.

So it was a bit of a drag on margins in the first quarter. In the second quarter and throughout the year, we expect the oil and gas portions of our Energy segment to be up high single-digits, 8%, 9%, led mostly by the liquid natural gas pipeline activity and the field services associated with the things we do there.

The Zetec outlook is much more encouraging. It'll support second half organic growth. It was a drag last year in the second half. And the segment in total will be on target for record performance in 2014.

And just as a reminder, that segment, which is about 15% of the operating profit of the company, it's divided sort of two-thirds to energy and one-third to industrial. Next slide is our Industrial Technology segment. Here we reported $56 million of operating profit on $197 million in revenue.

Industrial Technology is about 23% of the operating profit of the enterprise. We had double-digit growth in Neptune and continued margin expansion at Neptune. There's comments from certain competitors that are inconsistent with that, but we're right, they're wrong.

Higher material analysis revenues at Struers for both equipment and consumables, the equipment is a big deal, because Struers has been living on consumable growth for a while and equipment revenues have been sharply around the world. So that really bodes well for the rest of the year at Struers. And our Roper Pumps' Houston facility was opened.

In fact, all of our senior leaders toured that facility in the first quarter. It's a very impressing operation. A lot of customers have been through now, saying it's the best-in-class operation of its site anywhere in the world.

And we expect that to start to manifest itself in double-digit growth here in the rest of the year, which will improve our margins. That startup costs are what brought down the margin in the first quarter by a modest amount, but that will easily be past us.

In Cornell, which continues to perform remarkably well, had a big quarter with rental markets, all of which we think probably bodes well for the energy side of the activity we have in industrial. We look at the second half of the year. We're seeing Roper Pumps' capacity increase will drive share gains against particular competitors.

It will lead to double-digit growth for us at Roper Pumps and it'll improve our margins in that business, which were already quite sizeable. Neptune strength we expect to continue.

So we get reasonable numbers on new housing starts and continued build-outs and replacement of old meters and continued deployment in Canada and other systems that we've won. We see modest global industrial production continuing to be up, which helps drive our material analysis business.

And on balance, just continued growth throughout the sector, strong margins and cash performance throughout the year. Next slide. Here we look at the Radio Frequency technology segment. This delivered about $63 million in operating profit on $226 million in revenue. So the revenue, all organic, was up 8%.

The toll and traffic business remained very strong, had double-digit growth in the quarter, primarily in three areas, our Florida all-electronic tolling conversion projects, Texas expansion and upgrades to the technology, and higher tag shipments in Florida, Texas and California.

CBORD performed particularly well in the quarter as its recurring revenue was up nicely from some of these project installs we've had over the last several years in a terrific confirmation for continuing license agreements and maintenance with people.

And then we had the modest growth we traditionally see out of our SaaS businesses, which had really amazing, an exceptional leverage and cash flow contribution that helps us reinvest to drive our overall growth in the entity. In the remainder of the year, we think Transcore's backlog will support its continued growth.

Project work is continuing as expected throughout the balance of the year from anything we can see. And our quotation activity around the world on projects remains very strong and that's encouraging. In the software businesses, they're continuing to grow with exceptional margins and we're really starting to see end user increase drive activity.

Many times in these businesses, it becomes the early adopters or people who really need to have technological advantage in competing. And now the followers are jumping on the bandwagon, demanding some access to open solutions and being the best provider for those, where our demand and quotations are up at best levels ever.

Our college and university hosting activities have been increasing normally. In the past, they were more reluctant to do hosting than there have been recently and that may be a positive long-term uptick for us. Next slide. Here we look at the Medical & Scientific Imaging business. It really is a medical business.

Imaging is kind of split in two pieces, out scientific business with Gatan and then the camera businesses. Those things together are less than 25% of the segment. So medical is 75% and it's split between medical IP businesses and the medical product businesses. Organic revenue was up 7% in the quarter.

So we had double-digit revenue growth at Sunquest as our implementation improvements have really taken hold. We have more people deployed and we have faster turnarounds on them. MHA continued to benefit from favorable end-markets. The trends and the share gains that they have are driving growth certainly ahead of plan.

We've got solid execution growth across all of our medical device platforms with just extraordinary performance from Northern Digital in the first quarter of the year, more than double-digit growth there.

Our imaging businesses were better, led by growth in Gatan, so that eased the drag that that has had on our segment in the past and we expect that to continue for the rest of the year. But we also expect double-digit growth out of Sunquest. We've record backlog at the moment. And we got a terrific sales funnel.

That organization continues to mature and deploy resources effectively. So it's going to have really quite exceptional year in 2014. MHA continues as expected. We think the momentum and everything around its core businesses are solid. We have new and enhanced products at Verathon, which are kind of game changing.

The early acceptors of that, as we've been showing, is high. And we expect that will drive revenue throughout the rest of this year. And then we think the imaging businesses for the first time in a long time will have some modest growth that will make the overall segment look better.

Gross margins in that segment are very, very high and the EBITDA margins for this segment came in at this time at 43.9%. Next slide. So here as we look at the guidance outlook for the business as a whole, next slide gets into the detail. We're raising the guidance from what it had been $6.05 to $6.25 for the year to $6.22 to $6.36 on the year.

It's a $0.14 increase at midpoint. Our full year tax rate we still expect to be about 31%. It was a little lower, 28% in the first quarter and likely to be closer to 31% in Q2 and unfortunately a little bit higher in the balance of the year. We also think our organic revenue certainly at the bottom will be higher than expected.

So we've raised our guidance there from 4% to 7% to 5% to 7%. And established Q2 GAAP diluted earnings per share of $1.46 to $1.51. But as always, we would tell you that that's an interesting number, but you should follow the cash. Next slide. If you look at our first quarter, we gad record results in just about every category that you can find.

Revenue again was up 13%. Our gross margin was up 120 basis points and operating margin up 130 basis points. EBITDA appeared a run rate far in excess of $1 billion a year. EBITDA margin at 32.8% compared to the S&P 500 industrial gross margins of 28%, which tells you something about how great the businesses we have on our portfolio are.

Our operating cash flow was up 24% to $213 million. And the operating cash flow conversion rate, we said before, was 144%. Free cash flow conversion at 137% on $202 million divided by the shares get you really a spectacular number. And even our net earnings are up to 171.7% of revenue, which is far and away best-in-class. Excellent start to the year.

We've raised the guidance. We think the full year will be pretty spectacular as well. And with that, we'd like to open it up for Q&A..

(Operator Instructions) We'll have our first question from Deane Dray, Citi Research..

Solid operating performance across the board whether you look at topline, incrementals or cash. On the look-forward, Brian, you mentioned the $1.7 billion was what you've invested in the last 12 months. You can do that or better in the next 12 months.

Maybe some color on the pipeline and maybe address the challenges of how you positioned against private equity bidders..

So It was $1.07 billion, not $1.70 billion. So we did $1 billion-and-change and $50 million-and-change for Advanced Sensors. So we did $1 billion deal in total, $1.07 billion. We'd expect to do at least that much over the next 12 months.

In terms of what's going on with private equity, basically the debt staples from the banks remain extraordinarily high frequently. There are seven times debt to EBITDA, almost always some number close to that. And their ability to refinance is exceptionally high. So that puts a lot of pressure around prices paid for assets.

We've said for a while that gross premium on the tails of those kind of assets are pretty risky, but they're pretty low cost. So those guys are going to continue to stand in rapid rate, paying a lot of money for the things that they're doing.

The kind of businesses that we acquire from (inaudible) aren't really expected by that so much, because when they're exiting particular investment cycle and and sell the business any way, if the business fits in our categories and meets our standards and the management team, it is something that we think works with us, we still have the competitive advantage of being able to deploy capital to buy those assets.

So we actually are seeing as much now as we ever have seen in terms of attractive and available things. We don't have a timetable for when our next capital deployment would be, but we're active on a lot of different things. And I'm sure within next 12 months, you'd find us deploying more capital than we did in the prior year..

And then just on the businesses, I know there's lots of attention about the addition of Sunquest and MHA, but the legacy Software as a Service business, CBORD, maybe you can clarify the point on hosting. So I understand access control. I understand the driving haul. I understand the credit card. But maybe you can expand on the term of hosting activity..

What CBORD is at the core a license software company with maintenance and annual fees and revenues and renewals of what we have, because of some of the other things we've done and the ability to convert many more people to a hosted service just like a typical SaaS business would be that we have in an iTrade operation or (inaudible).

We continue to look at acquisitions that are in those spaces. And we think some of the budget pressure around college and universities is getting them to find it easier to do some of the work that we do for them in the cloud, where they haven't done much. And we're offering them solutions that they find easy to migrate to.

So we have been encouraged by people asking us if we could do more in that arena. Switching is those businesses, it's got a really high switching cost. So it gives us a leg up relative to other people who're trying to enter that market..

And just to clarify, what percent of that CBORD base today is on a hosted basis and what are the economics?.

It's still a pretty little number. It's less than 5% of their base primarily in one of their applications called NetMenu, which is really around menu planning and nutritional information and being able to kind of be the front end of starting that food supply chain through those campus locations.

And as far as the economics are concerned, I mean economics are really good for CBORD whether you're going with the traditional license plus ongoing maintenance for a more SaaS-based. There's really no different than the customer acquisition cost. And so it's probably a little bit higher, but a little bit load upfront.

But largely the economics are going to look very similar to the underlying economics for the CBORD business..

And our next question will come from Mark Douglas, Longbow Research..

Looking at your guidance on the organic growth, 1Q was the easiest comp and your guidance implies organic growth and continue to maintain this close to the 7% level, your comps are getting more challenged in the second half.

Just dive a little bit more into what's giving the confidence in the second half, do you think that'd be that strong, do you some things in the backlog?.

Sure. First of all, I know what the numbers say, but I'm not sure I would agree with the easy comp in Q1, only because Q1 last year was when we had the biggest variance associated with that loss customer (inaudible). It was not like it was artificially depressed. It just got the run rate as of last year.

And we did build some momentum throughout the year. So in some cases, you're correct. But based upon yet another quarter where the book-to-bill is above 1, so we did build some backlog even with the tremendous 7% organic growth in the first quarter. It gives us the confidence.

We have continued visibility, pretty good visibility within our toll and traffic area, parts of our energy in the market we have pretty good visibility on.

And it's just continued momentum on execution, particularly on medical platform where we not only have the backlog associated with Sunquest and deploying new upgrades to their software customers, but also a couple of new products that are being introduced in our medical products area that we think is going to drive incremental growth there also.

So it's the totality of backlog plus ongoing momentum inside of our key end markets..

Talking about the pumps market, curious what's happening in the underlying market.

Are you looking at low single-digit growth, mid single, just trying to get a sense of how much of your double-digit growth is new product launch, an increased capacity versus just a product mix maybe outgrowing the market or seems like you're outgrowing the market?.

Well, I think that we have three discrete pump businesses, each of the three should have a record year this year, each one for different reason. So we have Allweiler pumps in Germany, which is we don't talk a lot about, that has strong demand drivers in India.

And it's kind slurry pumps and things that have to do with moving anything from a mining [ph] capacity or whatever. That business is up a little bit. Then we have our double-digit reference that we made to Roper Pumps where we've been capacity constrained in larger diameter directional drilling, things and that's what this factory solved.

So as that comes, will this be taking share from other applications without naming customers would large cables, so that's kind of a guaranteed upside to us. And the underlying core business is okay as well, probably more high single-digit growth in that Roper Pumps business.

And then Cornell has fluctuations around rental markets when people are looking to waste water markets and putting together platforms and if you get a little bit more activity of background fracking in gas and they are benefited by that. And it's got a big business in agricultural irrigation projects.

It's pretty much a domestic business, a little bit in the Middle East. So it's growing. But I think there've been some people that are in similar spaces to Cornell. We've had pretty decent growth in the first quarter as well..

We have our next question from Jeff Sprague, Vertical Research..

Just a couple of questions. Brian, just wondering on medical margins. This is kind of two quarters in a row kind of in the 35% ballpark, extraordinarily strong.

I was wondering if there's something mixed effects of something that causes the step-up to this level, or is this kind of normalized run rate we should think about going forward?.

Well, if you look at those gross profit margins in those businesses and our ability to execute, that probably would answer that question. It is not going to have a lot of difficulty maintaining and improving its margins.

The business is well over 75% healthcare IT and medical products now as opposed to being one very strong business like Gatan and scientific instruments and the camera businesses, which have high gross margins but have high R&D expenses, usually double-digit R&D as a function of sales for those businesses because of high price cycles.

So yeah, we would expect to have very, very solid margins in the healthcare IT businesses like Sunquest and MHA..

And then just coming back around the deals, I mean what you said earlier to Deane's question pretty straightforward, but you do sound more confident. Just kind of reading some of the transcripts from the (inaudible) and everything, it sounds like you're viewing things as much more difficult maybe to get done.

What else has changed? Is the complexion of what's available out of private equity changing or is there some other dynamic that raises your confidence level a little bit?.

I wouldn't say that. I think that we've come close to doing a couple of larger transactions in the first part of the year that for a variety of reasons didn't occur. But yet, we're always involved in things that look pretty attractive and we're aware of things that are happening later on this year that are attractive.

There are different reasons why private equity is selling assets. And it's the end of life of a fund and they've got to sell as opposed to recap, they've gone through an unusual period where the cost of debt is so low and the risks and the mezzanine pieces are so mispriced that it's easy for them to recap stuff. But they can't recap that forever.

They got to cut the core and if they need the management team to stay in place, then there're only a few people around, Oh, my gosh, that are in the business of acquiring great management teams and making it better. And so that's why we're confident that we're always able to execute and capital deployment.

It's just we don't have a budgeted timeframe for saying, let's do $250 million a quarter or we're going to say, no, let's do $1 billion, $1.5 billion or more a year..

We'll go next to Matt Summerville, KeyBanc..

Just a couple of questions, first on Neptune. That business is up double-digits again.

Brian or John, how much of that would you say is market-related versus market share and why or why not should we expect that to continue?.

Inside the quarter, I'm not sure I can make the split between market versus market share. And we continue to execute in Canada for a large Toronto project at a pretty healthy rate. So that's helpful. We generally take a little bit wider lens on the market share question. And I would not say that that has substantially changed.

So I suspect most of this is going to be market-driven, but quarter-to-quarter based upon how projects are rolling out new rollouts of fixed network or mobile network implementation of the various cities, we'll move that a little bit. But we're still in the high-30% share range for Neptune.

And there's one of the things that we like about that are switching costs are pretty high. We have a pretty good representation in those areas that are probably disproportionately affected by new housing starts. So that probably over time gives us a little bit of tailwind..

If you have new housing starts that are on the uptick as opposed to where they were for a couple of years, we're likely to have a disproportionate share of that because of where new housing starts are. So we have a higher share in places that require water meters because of our technology being dramatically superior to other people's performance.

So if you have a hard out location and you're building in the Southeast or Southwest, we're going to have higher than our national share. So we just automatically gain at the expense of others as new housing starts are on the uptick..

And then just lastly with respect to Verathon, can you provide a little more granularity into some of the new products you're launching there and then just maybe a brief update on what you're seeing in your Dynisco business?.

Sure, I'll take the second one first. I mean Dynisco is doing just fine. It's a more industrial-focused areas, as Brian was talking about inside our energy segment. It was up in a low single-digit range in the first quarter. Pretty good operating performance margins, was up a little bit.

With respect to Verathon, what they're doing is really a refresh of a couple of their product lines, coming out with a titanium GlideScope. So it removes some of the plastic. It actually makes it slightly smaller for the intubation insertion, which is a big deal for the doctors and a big deal for the emergency responders.

So that's small size difference is actually quite significant in terms of the success rate of being able to have a success for intubation. And then also a little bit later a redesigned BladderScan unit that has significantly higher reliability and performance and ease of use for the nurses.

So it's really a refresh of the existing product lines, but with some real fundamental game changers, particularly on the GlideScope side..

Our next question comes from Steve Tusa, JPMorgan..

You actually had mentioned, I think, in mid-March, you guys were talking about some potential for weather-related disruptions, didn't seem to be the case, but maybe you could just expand on that, maybe you recouped all that in March or something like that, just kind of curious..

I think we certainly didn't expect a lot of trouble from the poor weather, but we had to run some over time, but it really worked itself out. We had a little bit more backlog at Neptune than we otherwise would have had, but there wasn't anything material about weather.

It's not some big windfall would get from additional shipments in the second quarter, helped a little bit in that respect, but not much. And the costs that we had were immaterial..

And then just moving to the businesses on the traditional kind of imaging side, it sounds like you guys are a little more positive on that. I think that was hit hard by the NIH budget last year.

Any updates on that business?.

Yeah, we did better in Japan and had a quite robust Q1 with Japan. But most of those businesses are really non-US businesses other than NIH here. They're okay. They will perform at the lowest level of incremental change or positive organic that we have in the company that may have decent fees relative to last year being a very good year.

But you have to remember that more than 75% of that business is really all healthcare. Imaging is sort of split. So you got maybe 10% or so in cameras and 10% or so or a little more than that Gatan in completely different world-class business.

The cameras are the ones that really are always waiting on maybe expanding out of Japan and something from China and NIH here. So those are the ones that have the cyclical risk, not the other half, which is Gatan..

When I look out to next year, with the rate guidance now saying the Street number for next year, looks like it's, I don't know, like 5% to 7% EPS growth. There're been a lot that's moved around in your businesses and you had a couple of businesses fall off last year.

Maybe there're some moving parts that I'm not accounting for, but is there something about the margins you guys are putting out, means your next year be an unusually weak margin year? I mean it seems like the organic growth is holding up in kind of the mid 5% to 7% range.

So that kind of number would imply very limited margin improvement and obviously nobody is taking any kind of real incremental acquisition accretion.

So is there anything kind of like unusual about the organic profile you guys put up this quarter and kind of this year that shouldn't kind of carry into the next year? The number seems very low, 5% to 7% EPS growth seems very low..

We never put any guidance around EPS growth for 2015. But we'd say we'd expect to do 1.5 to 2 times GDP, certainly have done a little bit better than that now and we might continue to do better for all of this year, could be all of the next year. I think there's a reasonable optimism at the part of our field people.

We just maybe do things a little different than some people. We went through our planning process for this year in February. We don't do it in the fourth quarter, because our bonuses are an incremental change year-over-year, not planned performance. So we don't pay off budget plans.

We'd be hard pressed to name a business that sees any fall off in 2015 from the planning cycle, but that's a long way away..

We'll go next to Christopher Glynn, Oppenheimer..

Wanted to extend these questions there, if you comment for the revenues, 1.5 to 2 times GDP.

Is there a sort of a 1.-something to put on EPS relative to topline growth over the cycle?.

Look, what we have generally wanted to guide folks, the way to think about that incremental growth is given our margin profile, we would expect that next dollar of revenue to convert to the pre-tax line at somewhere between $0.30 and $0.40, maybe a little bit higher than that in some years, but not lower than that.

And so I think if you run the math using that, and this is not really a time for us to be thinking much about 2015. The detailed discussions and strategic plan reviews that we have with our businesses to be able to have a much more informed view of 2015 and beyond, but that's much later in the year..

And then on RF, I'm wondering if the linearity changed at all. You had anticipated heavy project breadth in the first half. Now it sounds like things may be spreading out a little bit more throughout the balance of the year..

We still expect RF to be strong in the first half than the second half. And we started some of these projects toward the second half of last year.

But overall, of course with the balance of revenue coming from all of our segments, we still feel comfortable that the 5% to 7% for the full year is generally where all four of the segments will be, probably a little bit higher than that in medical. But the other three segments will be in that range of 5% to 7% for the full year..

We'll go next to Richard Eastman, Robert W. Baird..

Just a quick question.

On the energy business, when I look in the quarter and I look at the order number, were there any timing issues there or were you comfortable with the orders in the quarter? Sequentially it looked like perhaps were there any weather impact or anything that maybe held those back a little bit in the quarter?.

No, I don't think there is anything there. Energy's order flow is a little more like our (inaudible) CCC, which is a large player in it. It could be really lumpy. I mean they could get a $20 million order that didn't happen in Q1 and happens in Q2. And it doesn't mean anything.

You have to look at that over a kind of 12 month trending period and a trend for them is certainly up..

And then also in IT business, the margins are good, but maybe down a little bit year-over-year. And is that piece of the business, is that where you saw a little bit of weather impact on the margins, just curious how you looked at the margins there in the quarter..

Now, that's just Roper Pumps starting up Houston. You really have all the expense at the startup, but we take that period cost and just barely getting started on shipments. So that will write itself right away as we start to ship our product..

Brian, I noticed in the proxy that Roper has petitioned for a change in its gig code.

And I'm curious it wasn't mentioned to what, but are we thinking medical technology, are we thinking software?.

Our primary gig code is now our application software, medical and healthcare IT, medical products and there's some analytical instrumentation, I'm not sure what that gigs code is.

But because we have a lot of diversity, the two places they obviously put us into financial, almost capital markets thing, which is where I think they finally just put (inaudible). But in our case, they didn't have to put us in a conglomerate category, so we'll be with Danaher and GE and United Technology and there's like almost six people in there.

But unfortunately, they're quite large. I think Carlyle might be in there, I don't know. But that's what we would expect that we would go into the industrial conglomerates, I think it's called. And we would expect that to be announced by the end of the month, I think..

We'll just say to make sure from a proxy point, we were an electronic components or something. We don't have a single business in the gigs code to which we were assigned, not a single one..

Alex Blanton, Clear Harbor Asset Management..

I wanted to ask you about what you said about the Roper Pumps facility in Houston, because that was your original business and that was originally acquired before you went public by (inaudible) 30 years ago and under continuous improvement, you're still improving it apparently.

Could you tell us exactly why your customers are saying that that's a real class best-in-class facility in the world?.

Because the situation is we got several products in Roper Pumps, some of which are OEM products and some which are now products for the fracking operations, where they're doing drilling. So one of the things that happened is one of the large people in the space acquired another company, Robbins & Myers.

I think there are some customers who (inaudible) think they'd rather buy from maybe some other person like us. So we've been approached by people about could we do larger diameter products than we do in our Commerce, Georgia, facility, which is the founding operation of Roper back in the reference you have.

And we've had difficulty doing these larger things, because you got to have a couple of cranes. You need some automation. Got to have special heat-treat situations we need to do. And we had our Alpha instruments business, which is part of Dynisco acquisition that's an instrument company that is a very knowledgeable about rubber and latex.

And they came up with a way for us to have a substance that wraps the product that we're making here in a way that allows it to operate at faster speeds and in higher rates of temperature. So it's an entirely new technology for the industry. And that facility will be sole sourced on providing those larger diameter products in that arena.

And as it comes online, it will gain share from people that have less effective products now. And then they get used quickly. They have a short life. And so they get realigned, so by moving to Texas, we're close to the market where people can ship back the drills that can get realigned and go back for second use applications..

The second question is about what you said about the Russian business. What are you doing in Russia? And also, Asia was up 9%.

What's the biggest contribution you're getting from Asia?.

Well, in Asia, there's three areas of growth for us. I mean everything grows a little bit here. But you have Japan was up this past year on technological purchases. China was up modestly. And India was up sharply somewhat with our pump businesses actually and some instrumentation businesses. So those are the three bellwethers there.

In Europe, we did $125 million of revenue in the second quarter and $5 million of that was Russia. So going back to your day, so you would remember with Gazprom being the single most important entity that affected Roper most of the '90s is an irrelevant factor today. So Russia was 4% of the European activity.

And how that'll do over the balance of the year with whatever is going to happen politically will be interesting, but it's nothing it used to be where if you had a problem in Russia in Roper in 1995, the business was threat..

So that seg is a little bit with Gazprom?.

No, not necessarily. There are people who serve the install base. And so we have products that go into. We also have some products that still go into Russia. So it's just in the energy segment..

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

Thank you. And once again thank you all for joining us this morning. We look forward to talking to you at the end of our second quarter. Have a good day..

That concludes today's conference. Thank you for your participation..