Motorola Solutions' CEO Discusses Q1 2011 Results - Earnings Call Transcript

Apr.28.11 | About: Motorola Solutions, (MSI)

Motorola Solutions (NYSE:MSI)

Q1 2011 Earnings Call

April 28, 2011 8:00 am ET

Executives

Shep Dunlap -

Edward Fitzpatrick - Chief Financial Officer and Senior Vice President

Mark Moon - SVP, Government and Commercial Markets, Motorola

Gregory Brown - Chief Executive Officer, President, Director and Chairman of Executive Committee

Analysts

Peter Misek - Jefferies & Company, Inc.

Matthew Thornton - Avian Securities, LLC

Deepak Sitaraman - Crédit Suisse AG

Jim Suva - Citigroup Inc

Tavis McCourt - Morgan Keegan & Company, Inc.

Jeffrey Fidacaro - Susquehanna Financial Group, LLLP

Brian Modoff - Deutsche Bank AG

Ehud Gelblum - Morgan Stanley

Pierre Ferragu - Sanford C. Bernstein & Co., Inc.

Avi Silver - Credit Agricole Securities (NYSE:USA) Inc.

Operator

Good morning, and thank you for holding. Welcome to the Motorola Solutions First Quarter 2011 Earnings Conference Call. Today's call is being recorded. If you have any objections, please disconnect at this time. The presentation material and additional financial tables are currently posted on the Motorola Solutions Investor Relations website. In addition, a replay of this call will be available approximately 3 hours after the conclusion of this call over the Internet. The website address is www.motorolasolutions.com/investor. [Operator Instructions] I would now like to introduce Mr. Shep Dunlap, Vice President of Investor Relations. Mr. Dunlap, you may begin your conference.

Shep Dunlap

Thank you. Good morning. Welcome to our conference call to present Motorola Solutions' first quarter results. With me this morning are Greg Brown, President and Chief Executive Officer of Motorola Solutions; Ed Fitzpatrick, Senior Vice President and Chief Financial Officer; and Mark Moon, Senior Vice President, Sales and Field Operations. Greg and Ed will review our first quarter results along with commentary, and Mark will join us for Q&A. We have posted an accompanying earnings presentation and press release in motorolasolutions.com/investor, and I encourage you to review these materials.

A number of forward-looking statements will be made during this presentation. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of Motorola Solutions, and we can give no assurance that any future results or events discussed in these statements will be achieved.

Any forward-looking statements represent our views only as of today and should not be relied upon representing our views as of any subsequent date. Forward-looking statements are subject to a variety of risks and uncertainties that could cause our actual results to differ materially from the statements contained in this presentation.

I will now turn the call over to Greg.

Gregory Brown

Thanks, Shep. Good morning, and thank you all for joining us today. I'd like to start by saying that I'm very pleased with our first quarter results as we delivered excellent revenue growth with improved profitability and cash flow. Highlights for the quarter included sustained global demand across all regions, improved operating earnings, disciplined expense management and important examples that demonstrate our purpose, which is to help customers be their best in the moments that matter.

This morning, Motorola Solutions reported sales in the first quarter of $1.9 billion, an increase of 8% from Q1 of last year. On a GAAP basis, net earnings were $1.06 per share from continued operations compared to $0.29 in the year-ago quarter. Non-GAAP net earnings from continuing operations, which exclude intangible amortization, stock compensation and highlighted items were $0.54 per share, a 64% increase from $0.33 per share in Q1 of last year. Our Government segment posted sales growth of 5% with improved operating margins, demonstrating continued resiliency and demand for our public safety solutions. In the Enterprise segment, sales increased 14% from last year, with higher operating margins as we saw robust demand for our solutions from customers across all the major geographies we serve.

I'm now going to turn the call over to Ed Fitzpatrick to discuss our financial results as well as reporting changes. I'll then return to discuss operational highlights and provide a little additional color on the business. Ed?

Edward Fitzpatrick

Thanks, Greg. Before I review the financial performance, let me briefly highlight some changes we made to our reporting. On April 14, we filed an 8-K with updated financial information for Motorola Solutions' historical GAAP and non-GAAP financial results presented in 2 product segments: Government and Enterprise. Our Government segment includes our two-way radio business and our public safety systems business. The Enterprise segment includes enterprise mobile computing, scanning devices, wireless broadband systems, RFID data capture solutions and our iDEN infrastructure business. This new segment format provides further details and insight into our sales and operating earnings performance. In addition, the 8-K includes pro forma cash flow statements for 2008 through 2010.

Now on to our financial results for the quarter. Sales for the quarter grew 8% year-over-year, driven by Enterprise business strength, continued resiliency in Government and growth in all regions. Sales growth continued in our Government business, with first quarter sales of $1.2 billion, an increase of 5% from the prior year. Enterprise sales demonstrated sustained momentum as the segment grew 14% to $695 million, driven by robust demand in EMEA and stronger-than-expected demand for iDEN.

Although iDEN sales increased in Q1 compared to last year, we still expect a full year decline for this business. On a GAAP basis, earnings from continuing operations net of taxes were $365 million, and EPS was $1.06 per share. Non-GAAP earnings were $0.54 per share compared to $0.33 per share a year ago. For the rest of this call, we will refer to non-GAAP financial measures.

Gross margin percentage in the quarter was 50.3%, up from 49.3% in the same quarter last year. The increase in gross margin was due to favorable product mix in both segments. Operating expenses of $681 million were roughly flat in absolute dollar terms compared to the year-ago quarter. We continue to focus on expense management and executing our previously disclosed plan to reduce G&A costs while making the necessary investments in R&D and go-to-market capabilities. We are on target for removing separation-related G&A overhang cost by the end of Q2.

Our operating earnings for the first quarter were $267 million, or 14.2% of sales, compared to $175 million, or 10.1%, in Q1 2010. This 53% increase in operating earnings was driven by increased sales and gross margin coupled with flat operating expenses, which demonstrates the operating leverage of our P&L.

Total other income and expense was a net income of $3 million in the quarter compared to a net expense of $11 million in Q1 2010. The positive result in this line item was driven by investment and foreign currency gains, as well as lower interest expense due to adjustments in tax-related and other interest accruals. These net benefits favorably impacted Q1 by approximately $35 million, or $0.11 per share, relative to our outlook we shared with you last quarter. We expect this line to return to a net expense of approximately $30 million to $40 million in future quarters.

Our effective tax rate was 33.7% for the quarter, and we still expect the tax rate for the year in the range of 35% to 37%. However, as we've shared with you before, our cash tax rate is expected to be 20% for the next 7 years as we utilize over $1 billion of available tax credits. We generated $231 million in cash flow from operations and $204 million in free cash flow. We also generated approximately $217 million in operating cash flow from discontinued operations related to the Networks business in Q1.

From a working capital perspective, the accounts receivables days were essentially flat to Q4. Inventory turns decreased sequentially from 8.7x to 7.2x, which is attributable in part to lower seasonal sales in Q1.

We are focused on managing and continuing to improve our working capital over time, particularly inventory turns. We ended the quarter with $6.2 billion in cash and investments and $2.7 billion in debt. Our cash balance is now 35% in the U.S. compared to 31% after separation, an increase driven primarily by repatriation activities. We will continue working towards our goal of a greater than 40% U.S. cash balance by year end.

Turning now to our Q2 outlook. We expect sales growth of 4% to 5% over the second quarter 2010. This factors in the impact of approximately $15 million in reduced sales from the modules business we divested this quarter, lower iDEN revenue and potential supply chain disruptions in Japan. Our outlook is for non-GAAP earnings of $0.46 to $0.51 per share from continuing operations. This compares to non-GAAP EPS in Q2 2010 of $0.37 per share. Consistent with prior quarters, this outlook excludes expenses for stock-based compensation and intangible amortization of approximately $0.18 per share and items historically highlighted in our quarterly earnings releases.

The company now expects full year revenue growth to track towards 4% to 4.5%. This reflects growth of 5.5% to 6%, offset by a decline in our iDEN business and $45 million of reduced revenues from the modules business we divested this quarter. With this growth, we now expect operating earnings in the range of 16% to 16.5% of sales.

I'll now turn it over to Greg for segment highlights from the quarter.

Gregory Brown

Thanks, Ed. In Government, our sales for the quarter were $1.2 billion, up 5% over Q1 of 2010. We saw healthy growth in all regions except for EMEA, where continued challenges in Western Europe offset demand in other parts of the region. Our profitability also improved with operating earnings representing 11.7% of sales this quarter compared to 8.7% in Q1 of last year. This increase in operating earnings was driven by higher gross margins due to favorable product mix and a continued focus on operating expense management to drive further operating leverage. Although the general funding environment remains challenging in the U.S., there's some signs of improvement as tax receipts continue to increase and approach 2008 levels.

In addition, our customers continue to prioritize their public safety communication needs, and we remain focused on helping them find ways to fund system upgrades, improve interoperability and meet spectrum narrowbanding requirements. Examples of key wins that demonstrate our solutions to meet these needs include: a $14 million award in Cortland County, New York to enable numerous public safety agencies to communicate and improve coverage; a $16 million regional system with East Bay Regional Communications to serve the San Francisco Bay Area; a $10 million award in Brown County, Wisconsin to implement an ASTRO 25 system that will improve interoperability and enable more efficient use of spectrum; and finally, in Pennsylvania, we won a $31 million award to upgrade Berks County from a conventional system to the benefits of ASTRO 25 trunking.

We announced plans to begin shipping our ASTRO 25 systems with P25 Phase 2 TDMA trunking later this year. This is part of our standards-compliant, next-generation public safety portfolio that is transforming public safety operations and strengthening the mission-critical communications core. Nearly a dozen customers have already contracted with us to deliver P25 TDMA functionality.

In TETRA, we secured multi-million dollar projects with Airwave in the United Kingdom and with a Chevron affiliate in Kazakhstan to service one of the largest oilfields in the world. In Latin America, we won new multi-million dollar projects for ASTRO 25 radio systems with public safety agencies in Colombia and the civil police in Sao Paulo, Brazil.

Our innovation continues to earn recognition from our customers and industry as well. This year, we earned prestigious red dot awards for the designs of our industry-leading APX Portable radios and our Mission Critical Wireless Earpiece. And American COP Magazine recently featured our solutions for in-car digital video, mobile workstations and the APX integrated radio control head.

With respect to our next-generation public safety initiatives, during the quarter, we announced with Verizon Wireless a first-of-its-kind solution that combines a standards-based public safety broadband network tailored for mission-critical operations with the benefits of a leading public commercial broadband LTE network. As a result of this alliance, public safety agencies will benefit from economies of scale, site sharing, optimized network design and an open standards-based approach. The alliance allows agencies to supplement their mission-critical core platforms with the rich media services and the increased capacity and coverage of Verizon Wireless' public LTE network.

With bills now in the House and Senate in support of our first responder customers position, there is optimism about prioritization of the 700 MHz D block to public safety, which would efficiently and effectively double the spectrum available for a public safety-grade broadband data network. We've been investing in R&D for next-generation public safety for over 2 years, and our expertise in both public and private networks makes us uniquely qualified to deliver standards-based LTE solutions to our public safety customers.

Moving to the Enterprise business. Sales in our Enterprise segment were $695 million, an increase of 14% from Q1 of 2010. Operating earnings expanded to 18.4% of sales, up from 12.7% last year with robust EMEA demand and improved contribution from iDEN. Excluding iDEN, Enterprise operating margins still increased and were consistent with our Government segment. Retail, the largest vertical segment we serve in Enterprise, continues to invest in technology to empower workers and generate sales growth.

In January, we released the latest results of our annual retail study, which indicated 55% of retailers cited shoppers as better connected to information than their own store associates. When shoppers received guidance from a retail associate equipped with a handheld mobile computer, over 43% reported that the device improved the overall shopping experience.

The return on investment on our retail solutions is further supported by research that suggests nearly 1/3 of retail store visits ended with an average of $132 unspent because of out-of-stock items, limited store associate assistance and long checkout lines. An example of how retailers are investing in technology to respond to these trends is a $24 million award that we recently received from a large U.S. big box retailer to deploy in-store wireless infrastructure, mobile applications and security.

Another area of growth in Enterprise is among our transportation and logistics customers. We announced the $20 million mobile computing solution with General Logistics Systems in Germany and another award with Correos in Spain, both to further enable world-class logistics and package delivery. Additionally, we will continue to grow our Enterprise services portfolio with mobile security and network management solutions. During the quarter, we expanded our scale of these offerings with additional large retailers and financial institutions.

The RFID Journal recently recognized Motorola Solutions as the best-known brand in the RFID industry. Our RFID solutions enable businesses to advance to new levels of efficiency with realtime asset management and ensuring that the right product is on the shelf and available for the customer at the right time. Furthering our leadership in RFID, we recently introduced a contactless mobile computer based on our premier MC75 Enterprise mobile computing platform, which now features high-frequency RFID and near-field communications.

Now turning to a total regional view for the company. Our sales grew in all 4 geographic regions over the same quarter a year ago. North America grew in mid-single digits, while EMEA grew in high single digits fueled by continued strength in Enterprise mobile computing. Asia continues to grow with favorable economic trends and expanding infrastructure for transportation, public safety, utilities and health care. Latin America's performance is in part attributable to growth in iDEN, investments in infrastructure, adoption of Enterprise mobile computing and demand for radio communications systems.

From a go-to-market perspective, we hosted a channel partner kickoff event in every region, with 5,000 attendees representing our top worldwide partners for sales and product training. Our Motorola Solutions' PartnerEmpower channel, which spans both Government and Enterprise, was also awarded a 5-star rating in CRN magazine's 2011 Partner Program Guide, which recognizes outstanding partnership opportunities and support. We saw examples this past quarter where our equipment and employees delivered in moments that mattered.

Following the 6.3 magnitude earthquake in Christchurch, the second largest city in New Zealand, we contributed to rescue and recovery by sending wireless broadband gear, 250 TETRA mission-critical radios and other types of support. Our technicians on the scene worked with emergency services personnel to ensure systems were configured for full communications capability and integrated seamlessly with local emergency networks.

In response to the catastrophic earthquake and tsunami in Japan, we donated over 1,300 radios and other equipment to assist with rescue and recovery. Our employees in Japan are safe and have returned to work, and we will continue to support our partners in Japan during this rebuilding effort.

I'm proud of the responses from our employees worldwide, including their personal donations in our Motorola Solutions Foundation contributions, exceeding $0.5 million of disaster relief for both Japan and New Zealand. We continue to refine our overall portfolio to strengthen our focus on mission-critical communications solutions for public safety and enterprise. With this focus in Q1, we divested of our modules business, and we also sold a production facility in Israel.

Several weeks ago, we announced an amended agreement with Nokia Siemens for the sale of our Networks business for $975 million in cash plus $150 million in retained accounts receivables. We expect net cash proceeds of $1 billion after taxes, accounts receivable collections, assignment fees and other transaction fees and expenses. A significant amount of the net proceeds will be received in the U.S. In addition, our discontinued operations from the Networks business generated approximately $217 million in operating cash flow during Q1.

We received regulatory approval in China on April 20. And with all other remaining closing conditions satisfied, we are scheduled to close this transaction with NSN tomorrow. This will represent another significant accomplishment toward optimizing our capital structure, and we will provide greater clarity on our capital allocation decisions within the next 90 days.

Overall, our Q1 results were an outstanding start to the year, and we're well positioned for continued success with a strong balance sheet, a commitment to innovation and exceptional customers and employees. Shep?

Shep Dunlap

Thanks, Greg. [Operator Instructions] Operator, please instruct our callers on how to ask a question.

Question-and-Answer Session

Operator

Certainly. The floor is now open for questions. [Operator Instructions] Our first question comes from Avi Silver with CLSA.

Avi Silver - Credit Agricole Securities (USA) Inc.

I guess, just given the magnitude of the top line and operating margin beat, can you walk us through what factors led you to exceed expectations in the quarter? Were there any major mix benefits there? And I guess, in the context of your guidance, can you talk about why EPS should decline sequentially with revenue increasing 7% quarter-over-quarter? I can't recall margins ever being down in Q2 for solutions or for the former EMS business.

Gregory Brown

So Avi, first of all, thanks. in Q1, the strong exceeding in the expectations, over $0.32 a share to $0.54, $0.11 of that were from the operating dimensions of the business. And $0.11 of that were below the line. So when you look at it, quite frankly, we just had stronger volume and a favorable mix. iDEN was up. We didn't expect it to be up in Q1 on the infrastructure side. And quite frankly, we were more aggressive in exceeding some of the expense reduction targets than we had originally forecasted. So net-net, overall demand was strong in all 4 regions. Mix was favorable. iDEN was a positive surprise driven by international expansion, and we were more successful reducing costs than we had originally thought as we committed to get these costs out of the business in the first half. We also had some favorable foreign exchange. So think of it as $0.11 from the business and $0.11 below the line.

Edward Fitzpatrick

And on the below-the-line items, we don't expect those items to recur. And that's why I've said, "hey, we expect that line to be an expense going forward in the $30 million to $40 million range." We did have some favorability on gains in investments and businesses. As Greg mentioned, the modules business, we sold that business. We also had some other investment gains and some tax-related interest favorability, won some favorable rulings in international locations on taxes. So all those, that favorability, $0.11 per share, won't recur. So that's why you see somewhat of an anomaly Q1 to Q2. If you take those unusual items out, you will see that we are growing and we are improving the earnings per share from the operations of the business.

Gregory Brown

And Avi, just to -- a couple of points on the Q2 guidance. So we're guiding revenue growth of 4% to 5%. When you normalize for the divestiture of the modules business and you incorporate the way we believe iDEN will perform vis-à-vis a decline, that 4% to 5% revenue growth looks closer to 6% from the core operating dimensions of the business. We guided $0.46 to $0.51 earnings per share. That's up nicely over Q2 of last year of $0.37 a share. So we're still getting very strong EPS expansion, and we're growing the top line well. And remember also, Q2 of last year was a 12% quarter in revenue growth. It was actually, I think, the beginnings of the turnaround of the economic recovery. So it's off of a very high comp from the year-over-year quarter. That should help you dimensionalize the thinking around how we are moving forward.

Avi Silver - Credit Agricole Securities (USA) Inc.

Great.

Operator

We'll go next to Jeff Fidacaro with Susquehanna.

Jeffrey Fidacaro - Susquehanna Financial Group, LLLP

Greg, I was wondering if you can address, on the Government side, the sales up 5%. A bit better than we thought. And can you talk about the outlook for the rest of the year? And then if you could even break it down between the North America and Europe, I noticed North America, you're saying it was up mid-single in total and Europe was up high single digits. Could you sort of talk about that as respect to the Government side?

Gregory Brown

So we were really pleased, Jeff, with the Q1 performance of 5% growth in Government. We've continually mentioned the fact that not all government spending is equal. And I think what the quarter demonstrates is the prioritization that agencies across the globe continue to put in terms of the prioritization of mission-critical communications. Maybe to talk a little bit about the growth in North America and other regions, I'll let Mark Moon comment as well, who obviously runs worldwide sales and field operations for the firm.

Mark Moon

Thank, Greg. So as Greg commented earlier, we did grow Government in every region with the exception of Western Europe. And in most of the other parts of Europe, Government grew as well. So I think that was to be expected. What wasn't expected necessarily, even though we have constantly continued to be bullish on Government growth in North America, was that it would be as strong as it was. North America grew 6% in the first quarter, and as we look out through the end of the year, which was your question, we believe that growth will continue to remain similar to what we guided early on in the 4% to 6% range. So we see Government growth continuing to be strong. Quite honestly, we think it's very strong in the Middle East and Africa with some big opportunities. It's very strong in Asia, and we hope that Western Europe will also recover as we go through the year. So we're expecting good growth and similar to the guidance we gave early in Government as we go forward. And we continue to see peaks in the Enterprise growth, which is complementing that.

Jeffrey Fidacaro - Susquehanna Financial Group, LLLP

And just a quick follow-up. So on that side too, you do have long lead times in that visibility, correct? As far as contracts and bids.

Mark Moon

We've got a little bit of both, when you think about it. I mean, we've got good visibility to the funnel and the contracts we're working. We've got good backlog. When you look at the makeup of our backlog, the majority of that backlog is in the Government space. And once you've got these large contracts, then that, again, stems out not necessarily lumpy, but over an extended period of time. So because of our market position and because of where we are and what's going on, we feel really good about the comments that I'm making as far as projections for the rest of the year.

Operator

And we'll take our next question from Matt Thornton with Avian Securities.

Matthew Thornton - Avian Securities, LLC

Greg, I don't know if you mentioned this, but what was backlog for the quarter? Were we up sequentially and year-on-year?

Gregory Brown

So backlog. Well, I didn't mention it in the prepared remarks. But it's flat to ever so slightly down, which we were actually pleased with in combination with pruning 8% revenue growth in Q1.

Matthew Thornton - Avian Securities, LLC

Got you. And that's on a sequential basis or a year-on-year basis?

Gregory Brown

Both. It's actually -- it's like 1%, 1.5% both sequentially and year-over-year.

Matthew Thornton - Avian Securities, LLC

Okay, perfect. Perfect. And then could you just quantify -- you guys talked about the modules business that you sold in the quarter. Is that material? Can you quantify what the revenue run rate was there?

Gregory Brown

Revenue run rate was $60 million a year.

Matthew Thornton - Avian Securities, LLC

$60 million a year. Okay, perfect. And then the cost reduction, so it looks like you guys were a little bit ahead of plan of eliminating that $150 million. Where are we on that? Is that completely removed? Or are we halfway through that? And any sense as to what's left there?

Gregory Brown

I think we've made really nice progress. We also talked last quarter that we really started this in the fourth quarter. So I think we're right on track. We had a little bit of favorability, as Greg mentioned, in the quarter. But we still expect the full year to be in and around, taking out the $150 million that we had talked about.

Matthew Thornton - Avian Securities, LLC

Okay, terrific. And one last question, if I could. On the NSN transaction, it's set to close tomorrow. The transaction price was renegotiated from $1.2 billion down to $975 million, but it looks like the structure and the assets are the same. Can you walk us through what the change was and what the rationale for the price change was?

Gregory Brown

Yes. So first of all, it gave us greater certainty around closing. We also received concessions as part of that amended price. And we have the benefits of the earnings in cash for the first 4 months of this year. For the first quarter, it equates to additional cash flow of $217 million. That was not originally contemplated when we struck the deal and assumed it would close by 12/31. So we have always been assuming approximately $1 billion plus or minus net of tax, and that's what we will achieve tomorrow when we close the deal. So we're thrilled with that transaction.

Matthew Thornton - Avian Securities, LLC

Okay, that makes sense. Great. Perfect.

Operator

And we'll take our next question from Pierre Ferragu with Bernstein.

Pierre Ferragu - Sanford C. Bernstein & Co., Inc.

One more question on your Government business. I'm very impressed by the regions of the business. And based on your comments, you have reasonably good visibility on the regions for the rest of the year. My question would be, how would you assess any risk on that front of further Government spending cuts, further budget reviews that would put at risk this outlook, I don't know, on a 6 to 18 months horizon?

Gregory Brown

So I would say this, Pierre. As we mentioned, Government was good and pretty strong across all regions with the exception of Western Europe, where we thought it would be down. So we'll continue, I think, to see a challenging Government environment in Western Europe. But that said, with the backlog and the visibility, we feel reasonably comfortable that it can continue to grow in the other geographies. In addition, the Obama administration, if we move toward the U.S., has solidified with Congress a 2011 budget. At the end of the day, when we look at the 2011 budget on the margins, it doesn't look like it disrupts or materially contracts any available grant money here in the U.S. So we look at the U.S. grant and federal funding environment as generally constant in '11, which is favorable. And of course, there's some other things that are driving continued Government spending. There's a narrowband mandate here in the U.S., where new radios sold after the end of 2012 have to have a certain technical requirement that, that will allow for and continue to incent public safety agencies to refresh and upgrade radios to those new, narrowbanding-compliant subscriber devices over the next 18 months. So generally speaking, we're always looking at it closely. And in the U.S., certainly, it dominates the headlines around the deficits at the state level. But our experience, at least historically, and again demonstrated in Q1, is that not all Government spending is equal. And public safety mission-critical communications, interoperability and adding technology like video surveillance or other types of solutions that will augment and help pressure on headcount in public safety, continues put us in a favorable position. So we've incorporated all this thinking into the Q2 guidance and the full year, and we'll continue to stay diligent and watch it closely.

Pierre Ferragu - Sanford C. Bernstein & Co., Inc.

And what about Europe? Where do you see the situation stabilizing there or improving? Or do you think there is a risk of further cuts in budget and the situation deteriorating?

Mark Moon

I think the situation in Europe is mixed when we describe, what we call, our European region, because it's Europe, Middle East & Africa. Obviously, spending in the Middle East and Africa is pretty strong, and we're working on a number of very large opportunities there. Western Europe is where we have been seeing constriction, but there are some catalysts for spending like preparing for the Olympics, other things that are coming. And we're seeing, as we mentioned, this contract with Airwave, which was directly related to those kinds of things. We also had been declining in Western Europe for the past four quarters, which we predicted all along. I think now, we're getting to a point where we were also coming off some higher comparables, which made the decline there. As we go forward, I think it'll stabilize in Western Europe. I don't expect strong growth, but we'll get our growth out of the other regions. And then the other regions of the world, I expect to continue to grow at the consistent pace that we've outlined previously. So again, kind of reiterating, we feel really good about the outlook that we've provided.

Operator

And we'll go next to the side of Tavis McCourt with Morgan Keegan.

Tavis McCourt - Morgan Keegan & Company, Inc.

Kind of a big picture question. We're hearing a lot of -- I shouldn't say a lot, but some activity of Android operating system handsets getting into applications like U.S. Army and supply chain. And what I'm wondering is, in kind of the break up between your business and Sanjay's, is it a pretty clean split in terms of opportunities that you're able to go after that are clearly rugged? Or is the split based on operating system? And kind of talk about your ability to just shift operating systems from Windows CE to Android if it comes to that. And then, Ed, just a couple of financial details. The DSOs you put up this quarter and the cash conversion cycle, how should we think about that longer term? Is this a good representative quarter? Or does it get better from here or worse from here? And then the final financial question is, on the balance sheet, there's about $2.8 billion of deferred tax assets. Are there any allowances on that? Or is that a clean number?

Gregory Brown

So Tavis, on the separation of MSI and MMI, yes, I think it's pretty clean. The Mobility group has responsibility for consumer devices, which at this point to date, on the Smart phone side, Sanjay has been Android-centric. On the Enterprise side, which is our purview, we have been Windows-centric, Windows Mobile, now Windows handheld. We stay in close touch with Microsoft. I've talked to Ballmer just a few weeks ago, and we are continuing to stay very closely aligned to ensure that we are working together proactively on the Windows road map and how it evolves, whether it's Win Phone 7 or Windows 8 and the implications to our Enterprise customers. We have, as you know, Tavis, exclusive use of the brand in the Enterprise and Government side or military side that you referenced. But at the end of the day, there's nothing that limits our ability to either adopt Android or another operating system. And over time, over the next several years, I think that you see the development of what's called HTML 5, which will lessen the importance of the OS on the individual device, and allow the manageability and apps ecosystem to be written agnostic of whatever, whether it's Microsoft or Android, on the device. The fact of the matter is, we are Microsoft-centric today. There is nothing that limits our ability to go Android. We may choose to do that on certain specialty devices, either for the Enterprise or perhaps in a battlefield or public safety application. But we continue to work that, and that's being worked in Holtsville, New York with the device group, with our mobile computing group led by Girish Rishi. But there's definitely opportunity there.

Edward Fitzpatrick

Tavis, on the working capital front, yes, we do expect to improve as we go throughout the year. First quarter typically is our lowest quarter. I would say, just given the way that the math works, we will improve over time as we get more flow through on the cost of goods sold line on inventory. But on top of that, I think we still have some operating improvements to make, particularly in inventory with our sales and operations planning process. As we also implement an ERP, a single-instance ERP over the next year or so, we're in the process of doing that. We'll get better information from the start, from the sales force, all the way through operations and distributions. So we will improve on the working capital throughout the year. The second part of your question related to deferred tax assets and valuation allowances. We do have about $250 million of valuation allowances remaining on the $2-plus billion of overall tax assets that we have. And that really relates to the foreign operations that we have on a global basis.

Operator

And we'll take our next question from Peter Misek with Jefferies.

Peter Misek - Jefferies & Company, Inc.

Just a question to follow up on the cash flow. Your cash generation looked pretty solid even with some working capital puts and takes. As you look out through the year, I think your cash generation should be pretty solid. Can you walk us through what your plans are for returning cash or uses of cash sort of for the rest of the year? That would be really helpful.

Edward Fitzpatrick

Sure. I think your question really kind of alludes to the capital allocation question that we've got and that we've given you some feedback in the past. So let me first outline for you what we have said in the past and kind of where we're going to go from here. We've talked about executing on 4 things: One, completing the separation, which we've now done. The second item is obtaining solid investment grade at all the rating agencies. We've gotten that from 2 of the 3 rating agencies. We do, hopefully, expect to get that near-term third agency, bumping us up to solid investment grade. The third thing is closing the Networks transaction, which we now expect to be imminent, hopefully will close tomorrow. The fourth item was driving cash repatriation to the U.S., getting to that balance, as I talked about earlier, greater than 40% by the time we exit the year. We've also talked about paying down -- we are committed to paying down the $600 million of debt that comes due in November of this year. So we will do that. In the meantime, as we've been trying to execute all of these things, we have gotten very close to completing the initial phase of our capital allocation framework, incorporating our forecasts, future forecasts, as you talked about, cash flows, benchmark data that's out there and investor feedback that we've heard over the past quarter or two. With all of that said, we'll plan to come back to you in the next 90 days with our capital allocation decisions as Greg mentioned on the call earlier.

Peter Misek - Jefferies & Company, Inc.

Perfect. If I can ask a follow-up question, in your prepared remarks, your mentioned the federal LTE network. Can you walk us through any thoughts you have as to timing of some of these large network builds and sort of how you plan for that? I mean, it looks like it would be a pretty serious network resource drag, or network resource issue, to manage. It may take up a lot of your capacity. Can you just walk us through how you think about that and when the potential timing could be?

Gregory Brown

So we've been investing, Peter, in the LTE public safety, both infrastructure and device initiatives, for over 2 years. And we've been doing that, obviously, with no financial return to date. We don't expect LTE public safety to be a material contributor at all in 2011 either. We have 2 awards, San Francisco BayRICS and Harris County, Texas. We're working closely with both of those customers and would expect to start to deploy some of the resources and the systems associated with the implementation milestones in Q4. I wouldn't call it a drag on resources. I'd call it a redeployment that we've anticipated and planned for, both financially and operationally. It's in the product group under Bob Schassler. And we've redeployed R&D resources within our cost structure, and we've put a high priority on it. I think public safety LTE is the biggest opportunity we have in Motorola Solutions, looking out for the next 3 or 4 years. We've talked about that there's $1 billion-plus in the funnel that we work. We have to win it, but it's out there. We've also sized this opportunity incrementally to the core business of about $3 billion to $5 billion over the next five years. So Mark Moon is working on the go-to-market, sales organization and necessary partnerships, which we referenced with Verizon Wireless. And we're pretty excited about it. And I want to emphasize that it kind of brings -- it capitalizes on our expertise in public safety, and it also will bring the benefits to the public safety agencies of an open standards approach. So with that comes economies of scale. With the agreement with Verizon Wireless comes a substantial amount of site sharing, which I know politically and regulatorily is targeted in Washington, D.C. They want an open standards approach. They want the benefits of public/private. You want to capitalize on the existing infrastructure that's been spent on public safety, and we want to improve the interoperability. This opportunity is incremental to our voice narrowband public safety business, and we feel pretty good about it.

Mark Moon

Yes, the only clarification -- I think you made a comment about the federal network buildout. And I think is, there's a lot of discussion around what happens. Today, the plan is to really let this be a buildup of a lot of local systems, if you will, Greg described, too, that we're undertaking today so that the ultimate concept would be a network of networks. Clearly focused exactly on what Greg highlighted and what Washington wants to ensure, is that we make sure we keep interoperability and everything is standards-based to allow that to happen and to allow these network of networks to look like an overall nationwide network. And we're committed to stand behind both of those things as we go forward, and as Greg said, "Excited about that opportunity as we move forward."

Operator

And we'll go next to Ehud Gelblum with Morgan Stanley.

Ehud Gelblum - Morgan Stanley

A couple of questions. One was how big was iDEN this quarter? You said it was larger than you thought.

Gregory Brown

So we don't break out the individual quarter. But to reference you back to what we said in the financial analyst meeting, it was $400 million, approximately $400 million last year. And we thought it would be down to approximately $300 million in '11. It was stronger -- it actually grew, Hudi [ph], in Q1, but we still expect to decline structurally overall from the business.

Ehud Gelblum - Morgan Stanley

It grew quarter-over-quarter and year-over-year.

Gregory Brown

Yes, I think that's right. Yes, it is right. It grew both sequentially and year-over-year. And it was driven internationally by Nextel International, adding subscribers.

Edward Fitzpatrick

We actually expected, Hudi [ph] the first quarter to be roughly flat, and then the decline to happen second quarter through fourth. So just more color.

Ehud Gelblum - Morgan Stanley

Now when you say you expected it to be $300 million this year, is this -- when you say now it's going to be down, it's going to be greater than $300 million?

Gregory Brown

Probably yes.

Ehud Gelblum - Morgan Stanley

Okay. If I normalize the operating margin of Enterprise to the 11.7% operating margin of Government, it looks like there was an additional $46 million of operating income you got out of the extra iDEN, or at least out of iDEN. Plus a base -- I can get somewhere in the 50s, $50 million, $55 million of operating income coming out of iDEN. If you did $100 million, $120 million, $130 million in revenue, I mean, that's like 50% margin. Is that the right way to look at it?

Edward Fitzpatrick

We're not going to get to that level of detail in that business. As we talked about, this is the business that will be declining over time and becoming less a piece of the portfolio. We did have some favorable results of that business, which helped the results. But overall, the growth in the business really is what drove the improved results. iDEN did help a bit because it was actually up, and we plan it to be flat during the quarter. But we're not going to get to that level of detail.

Gregory Brown

Yes, and Hudi [ph], let me make sure that I didn't drive past your question. When you said you expect it to be greater than $300 million, I answered yes. We don't think the decline -- it will decline, but probably not as significantly as we talked about in Q4. So it will be up a little higher than $300 million, but still structurally declining. I wanted to make sure we didn't talk past each other.

Edward Fitzpatrick

Say, Hudi [ph], I'll just add one other thing. As you look at our results and the results of the Enterprise business, we talked about that the iDEN business is a mature business. The R&D investment of that is really more sustaining as opposed to a lot of new product introductions, if you will. So that business is a bit more profitable than the other business. Without the impact of iDEN, the Enterprise business and its profitability, when you look at it compared to Government, is roughly comparable. For the quarter, and I'll tell you, for the full year, as we said before in prior meetings, we expect it to be roughly comparable. When you back out iDEN, the profitability of the Enterprise business, should be roughly comparable to the Government business when you look at OE. It may be different quarter-to-quarter, but overall, you should think it about being comparable.

Ehud Gelblum - Morgan Stanley

Okay, that makes sense. I was going to go in there, just wanted to make sure I was right on that. Western Europe, that seems to be a problem. Two things: one is how large is Western Europe's? Can you help us quantify what that looks like in your Government side? And two, is the problem essentially governments that clearly don't have enough money to spend and are grappling with their own budgets? Or is there a competition issue there with TETRA?

Gregory Brown

So Western Europe Government is challenging. Western Europe Enterprise is strong. The challenges in Western Europe Government are structural austerity and funding, not competition. So I mean, I think competition's been constant. I don't think there's been a material change one way or another. So it's more, Hudi [ph], just the headwinds that they have and the challenges in many of the countries there, economically, and the deficits that they're battling back from.

Ehud Gelblum - Morgan Stanley

Okay. Can you help us quantify how large Western Europe is for you on the Government side?

Mark Moon

So obviously, we don't talk to that level of detail. But let me give you some color around what we've said in the past. If you'd think about your overall EMEA being roughly 22% or so of our business, the business in EMEA, different than in the other parts of the world, is relatively similar. Worldwide, we've talked about being 65% Government, 35% Enterprise. In Europe, it's roughly 50-50. Within that Europe, the business in Western Europe versus the rest of Europe is also roughly 50-50. So all of a sudden is you break this down to about a quarter. That size of Western Europe is probably 6%, 7% of our overall business. And again, it's only flat to slightly down. So we're talking about it but in the scheme of things, not really a big impact that we can't overcome. Obviously, I wish Western Europe Government was growing as well as everywhere else, but I don't see this as a big impact. But as you narrow it down to just that, Government. And as Greg pointed out, Western Europe Enterprise is growing and has been growing much faster than expected.

Ehud Gelblum - Morgan Stanley

No, that makes a lot of sense, and it was very helpful to quantify it. Last thing, you talked about a favorable product mix. Ed, I think you've mentioned that. Was that on both sides, the Enterprise and the Government? And can you tell us what products did better? Which ones didn't do better? And what impact that had on margins? And if you can relate that to next quarter, do you expect those same pieces to do well next quarter? You think it's going to revert?

Edward Fitzpatrick

So I'll give you a couple points of detail. They both did improve year-over-year. I'd say the Government improved a bit more. And I'd say the Government probably a bit better on the mix than on the Enterprise side. So a better improvement, I think, year-over-year in the Government. I won't get into the color. It can fluctuate, as we've talked about before, by as much as 1% quarter-to-quarter. We think it's stayed relatively stable. Year-over-year, we did have a nice improvement given the volume uptick, some favorability for sure in the throughput at the factory. So some favorability there. But mix probably really drove more of that. I'd expect it to be relatively stable in this range. We talked about margins be about 50%. That's the way I would think about it going forward.

Ehud Gelblum - Morgan Stanley

And what is that mix? When you say it's favorable, what products did better and which ones did worse?

Edward Fitzpatrick

I don't think we need to go to that level of detail. Because as I said, it's not going to be something that you can trend going forward. It will fluctuate quarter-to-quarter. As you think about it, you should think about approximately 50% modeling as you go forward.

Ehud Gelblum - Morgan Stanley

Okay, I appreciate it.

Edward Fitzpatrick

Thanks.

Gregory Brown

Thanks, Hudi [ph].

Operator

And we'll go next to Brian Modoff with Deutsche Bank.

Brian Modoff - Deutsche Bank AG

So guys, we could expect some type of decision around dividend, your dividend policy over the next 90 days or so, I guess, is one of the things you're saying. And then the second question is, what percent of your business -- your minuses [ph] is book versus ship on a given quarter? And then finally, in terms of North American Government, what percent of it is federal versus state and local?

Gregory Brown

So I'll take the first one and then I'll kick it to Mark to talk about the federal, state, local mix. As Ed appropriately walked through the framework for our thinking around capital allocation, and as we've said before, I mean, we totally understand that there's opportunities with the balance sheet given our total cash and our net cash position. We have pretty much satisfied the majority of the requirements that we were thinking about as we transitioned to the independent company. We made progress on our percentage of U.S. cash, up from 31% to now 35% of our total cash in the U.S. So we'll continue along the repatriation lines and look to increase that percentage. And as we've signaled before, we plan to pay down the $600 million debt note in November. Having said all that, there will be opportunities. We want to make sure that we continue to stay engaged with the rating agencies that we've talked to over the last 18 months, kind of giving them the milestones and signposts along the way up to separation and what we would do through separation. And then yes, within the next 90 days, we're going to give you some specificity around our thoughts and decisions around capital allocation. So I think we're in a good position. We acknowledge the opportunity is clearly there to return capital to the shareholders. And we've transitioned along the time line we've outlined, and I think it's going pretty well.

Mark Moon

So as regards to the Government business in North America, I think we've indicated in the past that it's about 58% of our total Government business. And of that, about 8% of that is federal. The remaining would be state and local and some level of commercial sales of those Government products. But so federal is a relatively smaller piece today of the overall North American Government market.

Brian Modoff - Deutsche Bank AG

And then in terms of your turns versus booked business in the quarter, given quarter.

Mark Moon

Right. So I think we talked -- Greg actually at the last call talked a little bit through that. When we go into a quarter, we go in with backlog visibility somewhere around 30% to 40%. And then if you think about our businesses, things like service, things like our personal communication radios, those things are fairly -- and it's fairly run rate that hits our Government. So very predictable. Then we come down to the business that you're really trying to get to, a quick turn kind of orders that we need to capture and ship in that same quarter. What we've said in the past, is that goal gets usually about 20% of our number.

Operator

We'll take our next question from Jim Suva with Citi.

Jim Suva - Citigroup Inc

Can you help me and investors bridge the news of the Government budget and hiring challenges? Meaning budgets are under pressure, but politicians really don't want to cut public safety and have a big backlash on their hands from the community. But yet we are seeing that the police and fire forces, instead of laying off employees, a lot of them are seeing lower enrollment in coming classes versus the retiring outgoing. So net, less individuals in the various public services for the fire, police and different forces. Will there be a lagging headwind at some point in the future from headcount reductions? Or does the systems implementation sizes trump this headwind? Or how can we think about bridging what we're seeing and hearing in the news everyday in your very strong results?

Mark Moon

I think that's a very good question and one that we get asked often times by investors. And the reality is we have been in a continuation over the last year to 18 months of reductions in headcount of public safety officers, policemen, firefighters. At the same time, as we've continued to show you, we continue to grow our business in the Government. We've had lots of conversations about that. In reality, I think it's tied to a couple of pieces. First, public safety. Even though we may be reducing headcount, I used the comment that one of the largest, major city chiefs said -- that said, "Even though we're being asked to do more with less, we've actually got to be better with less because there is no less expectation of the services we have to deliver to the citizens. So we've got to go invest in technology so we make the officers or firefighters that we have today more efficient and effective." So back to ROI, moving from the Enterprise space into Government, that's really happening. So we've continued to sell more and more technology into this piece to kind of augment the question that you asked around headcount reductions. The other piece, which I think is easy to say, "Okay, there is a policeman or a firefighter. And for every one of those, there's one radio." And fortunately, for us, in North America, that's true. And most of them are Motorola radios. But that's not really just the essence of what we do. When you think beyond today, we're really providing solutions. So there is computer-aided dispatch in what we call our integrated command center. There is other systems to actually manage and articulate data so you improve situational awareness. There's network components, there's video components. As we mentioned, broadband LTE. So it's much more than just thinking about "Do I equate the number of radios to the number of officers? And does that help me kind of forecast this business?" So I think, again, it's a challenge. I would certainly like to not see those numbers going down. But actually, it plays to something that makes us be able to leverage how the tools that we have make them more effective in those situations.

Jim Suva - Citigroup Inc

And as a follow-up to that, and then I'll be finished, is when we look at that shift, do you think that shift is more budgetary, the reduced headcount? Or is it just structurally? Because now, in technology, you have the ability to provide more services with less, given technology. What I'm wondering is just structurally, should we just build in that we should anticipate employee numbers just gradually being under pressure and going down over time because the infrastructure and the ability to do more with less continues to rise?

Mark Moon

I think it's strictly budgetary. I mean, all the police chiefs, the fire chiefs, the mayors, the governors that I have time to spend time with would prefer to, number one, increase productivity through technology, but also leverage more public service folks. No one is taking these reductions as, "this is something we would like to do." I think it is a necessity to do because of budgets. Thank you very much.

Gregory Brown

Thanks.

Operator

And we'll take our final question from Deepak Sitaraman with Credit Suisse.

Deepak Sitaraman - Crédit Suisse AG

Greg and Mark, first, just a clarification on the revised outlook. It sounds like your new guidance for the full year is based on a slightly better outlook for Enterprise and an unchanged outlook for Government. Could you maybe give us a little bit of color on the product or service areas or geographies, or even customer verticals within the core Enterprise business that are driving the slightly better outlook? And then I have a quick follow-up for Ed as well.

Gregory Brown

So I think that the improved outlook for the full year is because we are cautiously optimistic looking forward and we had a very strong Q1. Deepak, we do think that the Enterprise business has been fantastic. And that's even against -- that's these growth numbers against pretty high comps of last year as well. The retail vertical has been very strong. It's a leading anchor tenant vertical for us to begin with that positioned us with the acquisition with Symbol. But Mark and I were just with customers earlier this week, and a number of big box retailers, a number of home improvement customers -- there's a very favorable efficiency and return on investment characteristics of particularly Enterprise mobile computing and the deployment of wireless infrastructure that's favorable to us. The demand in Europe has been really strong and continues to be that. And we believe that between the backlog and the funnel of opportunities and the current customer engagement that, between that and the resiliency and consistency of Government spending, allows us to be able to modestly increase the full year. And by the way, I do want to say thanks, too, and I appreciate the kind words from many of you on the team. But our 23,000-strong associates worldwide have done a phenomenal job. The go-to-market team, the product folks, the supply chain organization could not be more proud. We've launched this business independently. We've been waiting for this a long time to come out of the gate strong and demonstrate the visibility and the uniqueness of what we believe to be Motorola Solutions' characteristics. And it's a great start.

Edward Fitzpatrick

Okay, and I think the only thing I would just add to that as we talked about on the call as well, we did expect iDEN to be down and we've talked about it being down but not quite as much. So that's also helping as well in the guidance that we've given you.

Gregory Brown

Good point.

Deepak Sitaraman - Crédit Suisse AG

Okay, that helps. And Ed, if I could, just a follow-up on margins. Based on your and Greg's comments earlier about margins and the Government business being roughly -- I guess, Government and Enterprise x iDEN being roughly comparable. First of all, it appears that the margin profile for the Government segment is lower than, I think, what we were previously thinking. Is this a function of how you're classifying certain costs? Or is this where it's always been? And then secondly, besides revenue growth, how should we think about the levels for margin expansion in the Government business?

Edward Fitzpatrick

So on the margins, let me clarify a couple things. We talked about the margins being comparable when you back out iDEN for Enterprise and Government. Remember, we guided full year operating earnings in the 16% to 16.5%. And we guided that, for the full year, we expected both businesses to be roughly in that space when you back out iDEN. So looking -- as you kind of look at our guidance for the full year, you could probably model it. You start out at a lower point, and we will expect the businesses to ramp from Q1 as we get into Q4, which we expect to be our biggest business. The margins will ramp really more based upon that as we expect gross margins to be roughly in the range that we talked about in the 50% range. As the sales grow, that will flow through to the bottom. We'll get the operating earnings to ramp up such that, for the full year, we'll get in the 16% to 16.5% range. Spending will be flat maybe to down slightly as we go throughout the year, right? You have merits, but will offset that with the cost reductions that we had talked about with the overhang. So maybe the numbers that you're seeing on Government are a bit lower than you've seen in the past because, remember, we had to reflect the impact of overhang in prior periods, and we're now getting those costs out, Q4, as I talked about last year, Q1 and Q2 of this year. So part of that ramp will happen because of the costs being taken out. The other part will happen because of the top line growth. I'll let Mark or Greg talk about the second part you had a question on was Government versus Enterprise growth and how that -- maybe I answered it with my question.

Gregory Brown

Yes, and I just think that we've said that you can think of this as Government growing in composite, kind of low- to mid-single digits, and the Enterprise as very high single digits. So you take those 2, meld them together to get the consolidated outlook. And as we continue to take cost out of the business, we're left with a pretty good operating leverage P&L. So as we can continue, get top line growth, there should be good flow-through given the cost structure.

Mark Moon

And in short summary, you kind of answered it, Deepak, yourself. I mean, I think we feel even more confident. I know I got a lot of questions when I said I was confident before about Government. More confident than ever on what we said about Government early on. And Enterprise in North America and Europe in particular has shown stronger growth. So you're right, we're just holding mostly Government where we've always said, but Enterprise looks to be even stronger.

Operator

At this time, I would like to turn the floor back over to Mr. Shep Dunlap, Vice President of Investor Relations, for any additional or closing remarks.

Shep Dunlap

All right, thanks. I want to remind everyone the details outline, highlighted items are GAAP to non-GAAP, P&L reconciliations and other financial information can be found on our motorolasolutions.com investor relations site. An audio replay, together with a copy of today's slides, will also be available on this site shortly after the conclusion of this call.

During this call, we have made a number forward-looking statements with the meaning of applicable federal securities law. Forward-looking statements are any statements that are not historical facts. These forward-looking statements are based on the current expectations of Motorola Solutions, and we can give no assurance that any future results or events discussed will be achieved.

Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Such forward-looking statements include, but are not limited to, our comments and answers relating to the following topics: the timing and planned sale of our Networks business; future strategic plans, potential cost reductions; the availability of Government grants and other funding and guidance for Motorola Solutions; earnings per share; future sales growth by segment, by region; future tax rate and cash tax rate; operating earnings; operating margins; profitability; expected cash position and repatriation; and return of capital to shareholders; and demand trends for Motorola Solutions businesses and products.

Because forward-looking statements involve risks and uncertainties, Motorola Solutions' actual results could differ materially from those stated in the forward-looking statements. Information about the factors that could cause, and in some cases, have caused such differences can be found in this morning's press release on Pages 12 through 25 and Item 1A of our 2010 Annual Report on Form 10-K and in Motorola Solutions' other SEC filings.

Operator

Ladies and gentlemen, this does conclude today's teleconference. A replay of this call will be available over the Internet in approximately 3 hours. The website address is www.motorolasolutions.com/investor. We thank you for your participation and ask that you please disconnect your lines at this time. Have a wonderful day.

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