Ladies and gentlemen, thank you for standing by, and welcome to the Babcock & Wilcox Company Third Quarter 2014 Earnings Conference Call [Operator Instructions] I would now like to turn the call over to our host, Ms. Jenny Apker, B&W's Vice President, Treasurer and Investor Relations. Please go ahead.

Thank you, Gary, and good morning, everyone. Welcome to Babcock & Wilcox's -- Wilcox Company's Third Quarter 2014 Earnings Conference Call. I'm Jenny Apker, Vice President, Treasurer and Investor Relations at B&W. Joining me this morning are Jim Ferland, B&W's President and Chief Executive Officer; Tony Colatrella, our Senior Vice President and Chief Financial Officer; as well as John Fees, Chairman of the B&W Board of Directors, to talk about our third quarter earnings and provide some additional information on the planned spinoff announced yesterday. Many of you have already seen a copy of our press releases, which we issued late yesterday afternoon. For those of you who have not, they are available on First Call and on our website at babcock.com. During this call, certain statements we make will be forward looking. I want to call your attention to our safe harbor provision for forward-looking statements that can be found at the end of our press releases. The safe harbor provision identifies risk factors that may cause actual results to differ materially from the content of our forward-looking statements. Our annual report on Form 10-K and quarterly reports on Form 10-Q on file with the SEC provide further detail about the risk factors related to our business. Additionally, I want to remind you that except as required by law, B&W undertakes no obligation to update any forward-looking statement to reflect events or circumstances that may arise after the date of this call. Also, on today's call, the company may provide non-GAAP information regarding certain of its historical results and 2014 outlook to supplement the results provided in accordance with GAAP, and it should not be considered superior to, or as a substitute for, the comparable GAAP measures. B&W believes the non-GAAP measures provide meaningful insight into the company's operational performance and provides these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding B&W's ongoing operations. A reconciliation of these non-GAAP measures can be found in our third quarter earnings release issued last night and in our company overview presentation, which was posted on our Investor Relations website at babcock.com. [Operator Instructions] With that, I will now turn the call over to Jim.

Thanks, Jenny. Good morning, everyone. Today, we plan to discuss our third quarter earnings as well as the announcement we made late yesterday in regard to our board's authorization for management to pursue the tax-free spinoff of our Power Generation business to our shareholders. John and I will share with you more details on this milestone decision after a discussion of our operating results. Our Q3 results represent a significant improvement compared to the past 2 quarters and provide important momentum, which we expect to build on over the next several quarters. Consolidated revenues for the third quarter were $737 million, and adjusted earnings per share were $0.53. Non-GAAP operating income totaled $85.6 million for the period. Not only is NOG continuing to perform at a high level, but we believe PGG is turning the corner and showing improved revenue and operating margin. For the full year 2014, we expect revenue will be approximately $2.9 billion and adjusted EPS to be in the range of $1.75 to $1.85, a narrower range with a higher midpoint than previously forecast. While we're pleased with these results and believe they represent a significant step forward for the company, we remain focused on executing our efficiency and cost improvement programs and expanding PGG's international and renewable reach to ensure sustained revenue and earnings growth in 2015 and beyond. In the third quarter, our Nuclear Operations segment recorded the strongest third quarter revenue and second-highest Q3 operating income in the segment's history. Consistent execution and a commitment to continuous improvement are keys to the strong performance of this business. The Power Generation group produced sequentially improving revenues and operating income, and importantly, an improved 8.8% operating margin. Bookings in the quarter were fully in line with our expectations, but were lower than in Q2, which…

Thanks, Jim. Revenues in the Power Generation segment for the third quarter of 2014 were $402 million compared to $427 million in the third quarter of 2013, a decrease of approximately $25 million. This reduction reflects $45.2 million lower quarter-over-quarter revenues in our new build steam generation systems business, primarily related to the timing and level of utility boiler and renewables projects. New build environmental revenues decreased $22.8 million, reflecting both the completion of projects underway last year and continued uncertainty regarding the impact of future environmental regulation. Revenues in the aftermarket services business decreased modestly by approximately $9.9 million, reflecting a steady replacement parts business, offset by timing of service projects primarily in the Canadian market, while MEGTEC contributed $48.9 million of revenues in the quarter. Power Generation bookings in the third quarter were $320.1 million, an increase of $49.9 million from a year ago. Backlog in Power Generation exceeded $2.1 billion at the end of the third quarter of 2014, in line with our expectations and roughly unchanged from the backlog at September 30, 2013. Operating income in the Power Generation segment, including the equity income of our global joint ventures, was $35.3 million in the third quarter of this year compared to $38.3 million in the prior year quarter, primarily due to lower revenue as previously discussed. Operating margin for the quarter improved to 8.8%. This was driven by favorable contract performance, together with lower SG&A and overhead expenses due to our ongoing cost-savings initiatives. MEGTEC contributed $2.7 million of operating income in the quarter. This was net of a $3.4 million of amortization expense recognized in the quarter as results were impacted by a significant level of intangibles amortization, which is required under U.S. GAAP to be recognized in the first year post-acquisition. The Nuclear Operations…

Thanks, Tony. Since becoming an independent company in 2010, the B&W Board of Directors and management have successfully pursued and capitalized on a number of opportunities to improve performance and increase long-term shareholder value. Over the past 2.5 years, we've taken several meaningful steps to enhance shareholder value, including cost reductions through our GCI initiative and margin improvement programs, derisking the mPower program, the initiation of a dividend and the repurchase of more than $400 million of our common stock. With yesterday's announcement of our intention to spin off the Power Generation business, we are taking what we believe is an important step in our efforts to unlock even greater value for B&W shareholders. From my perspective, I believe this is the right decision, and I look forward to leading B&W through the spin and our Power Generation business thereafter. With that, let me turn the call to John.

Thanks, Jim. The B&W board has taken a thorough look at a broad range of strategic opportunities to optimize each businesses' ability to grow and increase shareholder value. It is our belief that separating the Power Generation business and the Government Nuclear Operations business is the best option to accomplish these objectives. Spinning off the Power Generation business will establish 2 strong independent public companies that will benefit from independent management teams, each equipped with the resources, strategic economy and financial flexibility to create significant long-term value for their respective shareholders. We believe that the spinoff will result in material benefits to the standalone companies and our stakeholders. Among those benefits for each business include: increased flexibility to deploy and execute a focused capital structure, consistent with the strategic priorities of each business; secondly, a clear investment thesis and visibility to attract a long-term investor base suited to each business; and finally, a greater management focus with incentives that are better aligned to execute each company's strategy and operational performance. The Board of Directors has named Jim and I to leadership roles in each of these businesses, and I'm excited about the opportunities that lie ahead. I would like to speak to the Government and Nuclear Operations segment. This business will operate under the name BWX Technologies or BWXT and will consist of the Nuclear Operations, Technical Services, Nuclear Energy and mPower businesses. The BWXT name comes with a rich history and a solid reputation that includes a brand image widely recognized throughout the industry. I am pleased, after 35 years of affiliation with the company, to once again become an employee and to serve as the Executive Chairman of BWXT. Sandy Baker who has more than 40 years of service with the company and currently serves as the President…

Thanks, John. As a standalone business, PGG will continue to operate under the Babcock & Wilcox name. With expected 2015 revenues in excess of $1.7 billion, B&W Power Generation is a leading technology-based provider of advanced fossil and renewable power generation equipment that includes a broad suite of environmental controls and products and services for both power and industrial uses. Approximately half of the revenue in our business comes from a solid base of recurring aftermarket parts and services, while the other half of the revenue base is more project driven. The Power Generation business has a worldwide presence with large-scale operations in North America, Europe and Asia. We have more than 6,300 dedicated, skilled and talented employees in 13 countries, not including the employees in our joint ventures in China, India and Australia. We expect that B&W Power Generation will continue to pursue growth in international fossil and renewables, boiler and environmental controls markets and through expansion of our new industrial environmental platform. As a stand-alone company, we are well positioned to move into a consolidating North American and European coal market and to focus strategically via either acquisition or strategic partnerships to expand global reach and move into select adjacent markets. B&W has superior technology, a comprehensive suite of products and services and a brand name that is attractive to customers worldwide. We are rapidly enhancing our cost-competitive manufacturing and engineering capabilities and streamlining our global cost structure. We believe that we're well positioned to capture value from our existing North American base, while positioning the new B&W for growth with our traditional coal and renewable technologies internationally and our existing and new industrial environmental platforms worldwide. Upon completion of the separation, I've been asked to serve as the Chairman and Chief Executive Officer of the new Babcock…

[Operator Instructions] We have our first question from the line of Tahira Afzal of KeyBanc.

So Jim, you always throw a lot of information at us that 2 questions are not enough, but I'll start with 2 and follow-up later. Number one, clearly, in the power side, very strong quarter. The implied fourth quarter guidance does indicate you see slightly lighter or lumpiness. So could you talk a bit more about that and how you build up from that into the 2015 framework that you've given.

Sure, Tahira. Thanks. So I'll start off a little bit on Q3 earnings, move into Q4 and talk a little bit about 2015 for PGG. We did -- we had a very strong quarter in Q3. Operational performance in the Power Generation group was good. We did have $0.03 or $0.04 of upside, in particular some project closeouts on some projects that are going very well, moved from what we thought would be Q4 back into Q3, so that accounts for a little bit of the strong Q3 and in what could seem to be a little bit of a difference for Q4. So as we look into 2015, we've talked in the past about a minimum 10% growth in revenue in the baseline Power Generation business before we consider the additional revenue from MEGTEC, and we continue to see that. We can see it in our backlog. We can see it in our bookings, and we continue to feel good about 10-plus percent growth in the core business going forward. On past calls, we've also discussed targeting a 9% operating margin in the Power Generation business for 2015. Given our recent performance, we continue to believe that's a very achievable number.

Got it, okay. And second question, and really, congratulations to all of you who're moving on into a new position, and Tony, thank you for all the support and help you provided over the last few years. If we look at the tax-free spinoff, could you talk a bit about the ability to hold on to the tax-free status to the extent you can, if someone does pop in between now and mid-2015 and look at one of those segments, one of the split companies as a potential purchase? And I did notice that the structure you're setting up in terms of the split with sort of Nuclear ops and all your -- your Government and commercial Nuclear stuff being classified as one company, it sort of falls in tandem with one of your private larger sort of competitors and contractors out there and partners. So would love to get a bit more of a sense on how you've chosen to really split the 2 companies up.

Sure, Tahira. So I'll start off and then I'll ask John to jump in. In regard to the tax-free nature of the spin, we feel very comfortable that the businesses will spin tax-free to our current B&W shareholders. We've stated in the past and we'll restate that the businesses are not for sale and so we don't see any risk to the tax-free nature of the spin. In regard to Power Generation spinning, and in essence, the rest of B&W remaining together, for us, that's a logical structure. Power Generation is a competitive commercial business as opposed to the 2 Government businesses that clearly belong together. NOG and TSG are inter-reliant on one another. Probably the question for folks would be a little bit around the NE business. In our view, NE is more strongly tied to the nuclear experience and expertise that exist in TSG and NOG. And certainly, if we can find a way to pick mPower up in the future, mPower's viability and our ability to manufacture components and design components for that business is dependent upon the skills that exist in NOG and the steam generator skills that exist in the commercial NE business in Canada. So from my perspective, it was pretty clear that Power Generation is certainly large enough, strong enough, capable of standing on its own, and its business model is sufficiently different from the remainder of B&W that it makes sense for PGG to go one way and the rest of the businesses to stay together moving forward.

Yes, Tahira, this is John. I agree with what Jim said. We had made some moves prior to this announcement to align the businesses that will remain as BWXT in prior periods. And so the intent there was to really try to get things together that really belong together. They do similar things. They have similar core skill sets. And the ability of that talent to work across the product lines is much more evident over there. PGG really is a very, very stand-alone entity in many respects relative to its markets, its technologies, and really, its opportunity's being focused much more internationally.

The next question is from the line of Andrew Kaplowitz of Barclays.

It's Vlad Bystricky on for Andy. So PGG margin was up nicely in the quarter and I know you talked about a couple of closeouts and I know you've been working on taking costs out for the last couple of years. So can you talk about what -- anything that you were doing differently in this quarter that really drove that uptick? And is this really just starting to see the fruits of all the cost takeouts you've been working on?

Sure. I'd be happy to talk a little about PGG Q3 earnings. Yes, as you mentioned, there were some project closeouts and that's due to good project performance that we had anticipated in Q4 that moved back into Q3, say, roughly $0.04. If that $0.04 had stayed in Q4 instead of Q3, it would have taken the PGG margin from roughly 8.8% to about 8% or the high 7%. So still a good performance and still a significant improvement over the front half of the year. You're correct, there are a combination of things that have come together to help Power Generation's margin. One, operational performance. We are absolutely focused on performing for the customers. We've worked off that one bad project that we had, and we're performing quite well operationally. Number two, absolutely, we're beginning to see some of the upside benefits from the cost takeout and the efficiencies. We would expect to see that continue and even accelerate as we move into mid- and late 2015.

And we did benefit from somewhat higher volume as well this quarter.

Yes. Tony's correct. We did have a little bit of a volume pickup in the quarter as well.

Okay, that's helpful. And then maybe just sticking with PGG. So you've talked about ramping your ability to pursue international power projects in PGG. So can you give us an update on where you are in the process of expanding your global business development infrastructure and maybe give us some color on any traction or challenges you're seeing as you pursue international opportunities?

Right. So we do continue to -- Elias Gedeon, as I've mentioned before, is on board and he's beginning to get significant traction for us. I mentioned on the call that we have added a higher-end business development expert in Europe as well who brings to us not only knowledge of specific projects, but more importantly, knowledge of customers and potential partners. As we look to grow internationally, a lot of the projects we're going to be pursuing, whether they're fossil based or whether they're renewable waste-to-energy, are larger in size and a lot of those take some time to develop. We have some inherent advantages in the marketplace. We have a superior technology. We have an ability to deliver internationally. We have the strong B&W name. And the one area we're really trying to improve is customer relationships and relationships with potential partners, right? And that's really the focus of Elias' efforts and his now developing team. We're beginning to see that pay off. We mentioned a bid pipeline of $2.9 billion as compared to $2.6 billion last quarter. That $300 million change is primarily larger-scale international projects that we're now pursuing.

Jim, if I could just add one other point. We're also benefiting, as we've said in, I think, last quarter, from taking advantage of our global manufacturing supply chain, specifically in low-cost countries where we do have a very strong presence now.

Yes, Tony's correct. So to be a little bit more specific even than that, we've been working hard to bring our India facility online. We believe that will provide long-term competitive advantage for us in the marketplace, both in terms of ability to manufacture components cost effectively, but also the ability to design and engineer components. And that upside is playing out. A couple of the recent large projects that we've already announced, we plan to manufacture out of India, and 2 or 3 of the larger projects that we expect to pick up in either Q4 or very early in Q1 2015, we plan to utilize the India facility as well.

The next question comes from the line of Brian Konigsberg of Vertical Research.

Maybe just touching a little bit more on international power. So it sounds like you have a fairly decent position, but how would you characterize just the competitive environment? I mean, is it a more difficult environment for you? And is it a challenge -- does it become a little bit more challenging to hit your operating margin targets with more international in the mix? Or is the profitability on those similar to what you're used to domestically?

Thanks. One question on market, one on margins. We do see some strength in the international marketplace. You can see the bid pipelines improved. Part of that is because I think we're doing a better job of pursuing opportunities. Part of it is because there is a relatively stable market internationally. I wouldn't characterize it as rapidly improving, but I wouldn't characterize it as deteriorating either. And targeted in the right places, we think there's an awful lot of opportunity internationally for PGG. In regard to international projects and what sort of margin can we expect, fair question. We are being very careful as to what types of projects we target and in what countries we target those projects. Typically, a project that's going to be competitively bid among many, many bidders is not as attractive to us as opposed to a project that is a little bit more relationship driven, a little bit more technology driven. We tend to do better in those markets and those are the types of opportunities that we're pursuing now and we'll continue to pursue as we move forward. So we think the larger international projects, particularly leveraging our Asian, Indian manufacturing base, will result in competitive margins and margins that are in line with what we expect to make in the broader business.

And a number of the projects also that we're seeing on the renewables side, certainly, they're competitive but the number of competitors who can effectively compete against us, against our technology and our cost platform actually are generally relatively limited. It's typically 1 or 2 others at -- on a given project at most. So we feel pretty good about that, too.

Great. And if I could just add a follow-up on -- so with the expected growth in PowerGen, balancing that with the opportunities you do see in the pipeline to book more work, I mean, do you think that you could have backlog growth in '15 just given the dynamics? I know maybe it's a little bit early to tell, but, I mean, is the opportunity there to grow backlog?

I believe the opportunity is there. That's certainly the goal. That said, we're not going to chase projects just for backlog and revenue. Your question about margin is very applicable. We have to make sure we can deliver and that we can deliver at a fair margin. I think we have a reasonable opportunity to grow backlog as we move into 2015.

And the next question comes from the line of Rob Norfleet of Alembic Global Investors.

Just a quick question. I know you kind of answered this in a couple of ways. Just want to ask it in a different way. On the PGG, clearly, it's within the portfolio that exists today, it's always been the more cyclical business in the portfolio, and I understand the 50% recurring revenues and aftermarket as well as a growing international portion of the business. Yet, you're still kind of tied to the CapEx cycle of utility customers to some degree. So Jim, I guess, my question to you is, I mean, how do you feel about the portfolio today in terms of being able to manage the volatility of those end markets and not having the stability in cash flows of major operations to support the business in a more volatile environment?

It's a fair question on PGG. The aftermarket business does provide an awful lot of stability. We do have some exposure, as you mentioned to utility CapEx budgets, in particular in regard to new environmental build-out in the States. That said, although the aftermarket business in North America may move a little bit up and down depending upon market conditions and utilities' CapEx decisions, coal still generates 35% to 40% of the power in the U.S. and it's going to for the next 5 or 10 years. And even if 15 years from now, it only generates 25% or 30% of the power, still a pretty good aftermarket and recurring revenue and margin business for us. So North American aftermarket, we see being relatively stable, and we've talked a lot about structuring the company going forward to recognize the stability in North America, to recognize that it's not likely to be a growth engine necessarily and making sure that we have a company that's structured to reflect that reality. That said, we see an awful lot of diversification, upside opportunity internationally. And when we say internationally, we mean both in Asia for fossil and renewable pipe work, and in Europe, primarily for waste-to-energy and aftermarket services. So Power Generation, I think we have a pretty good base in North America and we might even pick up a little bit of work on the environmental side, depending upon market conditions and what the EPA does with some rules. We see upside in Europe going forward and we see some upside in Asia. So those 3 different markets and opportunities provide some diversification and balance and now we've added MEGTEC to the portfolio, which is a $200 million-plus business, very stable. I would argue a lot of growth upside for us as we move forward. So we think we have a pretty nice suite of products and technologies and geographies in PowerGen as we move out on our own in the coming few months.

Okay. Great. And I just have one follow-up for Tony. After the split, how should we look at the outstanding pension liability? Is that largely going to be held at BWXT?

No. It'll actually end up being split, and it's pretty well defined anyway now between those folks that work in the Power Generation business and then those that work in the Nuclear Operations Group. The split roughly will be 50-50. It's still TBD a little bit, but you should think of it roughly as it will be easily split and relatively easy to track going forward as well.

And the next question comes from the line of Bob Labick of CJS Securities.

Jim, you touched on it in your remarks at the end there a little bit, but I was hoping you could be a bit more specific. Can you talk about the optimal capital structure for each entity and how long it will take to accomplish that post spin?

Well, I can make a couple of comments on it. We've gone ahead, we've announced the spin. We're continuing to work internally to determine exactly what the right capital structure will be for both businesses going forward. I mentioned that it's likely that PowerGen will spin with no debt. There's still a cash position to be determined for both companies going forward. So I'd say it's a little bit of a work in progress. The fundamentals for us are clear. Our desire is to spin 2 very stable, well-capitalized businesses. We think we're well positioned to do that with the minimal debt we have on the balance sheet today and the cash flow that we generate internal to the business. As to the exact numbers and structure at the split and for each business going forward, we'll probably leave that to update in the coming couple of months.

Okay. And then you talked about -- obviously, we spent a fair amount of time on the international drivers for PGG on the call. I was hoping maybe you could remind us and just talk about the next few years growth drivers for BWTX (sic) [BWXT], obviously excluding the Ohio Class when that comes on. What are the other -- we've looked at that as more of a steady-state cash flow business. What are the other growth drivers and opportunities for that new entity?

This is John. We have, obviously, a good stable platform of the business, but we are pursuing growth. As Jim indicated in his remarks, we have an expanded bid base that we're doing in the government services area. Jim mentioned Chalk River, an exciting opportunity for us. There's a series of opportunities in the U.S. that we're aggressively pursuing, so we really want to get more strength in there and a diversity of customers in that business beyond the Department of Energy. So that is well underway, heavily being pursued. There are some things we can do in adjacent markets to what we currently do. I'll give you one example. There is a program to build missile tubes for the next-generation ballistic missile submarine. That's about $1 billion worth of opportunity over the life of their program. We are currently in some preliminary bid activity and would expect maybe some near-term rewards in there if we're successful. So that's an example of something that we're currently not doing in an adjacent market where we could pursue growth. Those are the kind of opportunities that we want to pursue going forward into the future. So it's just not standing still and looking in the same direction. There are opportunities.

And next question comes from the line of Martin Malloy of Johnson Rice. Martin W. Malloy - Johnson Rice & Company, L.L.C., Research Division: On the -- within the power segment, you've got some ownership of some of your competitors, Foster Wheeler, Alstom and Flux. Could you maybe talk about or share your thoughts on potential consolidation?

You are correct that some of our competitors, Foster Wheeler and Alstom, are both in the process of being acquired and I would anticipate those deals from -- just from reading the press would close in the next few months. Again, as I said before, we're not for sale. We're not in any discussions with anybody in regard to consolidation. That said, clearly, in North American market, there -- over the next 2, 3, 4, 5 years, there could well be consolidation opportunities as we move forward. The market is stable to slowly shrinking most likely. Those opportunities could be there. Our belief is that the Power Generation group would be well positioned to talk with anybody about those in the future, but that's not something that's on the radar screen right this second. Martin W. Malloy - Johnson Rice & Company, L.L.C., Research Division: Okay. And then with respect to mPower, could you give us maybe an update there on any potential interest that you're seeing out there from investors, maybe international investors? Is there any activity?

A couple of comments on mPower. One, we do have funding stabilized at $15 million annually at this point and that makes some sense to us. We continue to work with the DOE moving forward. And we do continue to engage with various potentially interested investors or partners, both in the U.S. and internationally. If at some point we have something specific to announce, we will. For now, I'd just say that there continues to be some level of interest and we continue to dialogue in the marketplace.

And the next question comes from the line of Steven Fisher of UBS.

Jim, I know you said in your comments that you're trying to minimize standalone costs. I wonder if you could elaborate that a little bit. I assume what you're trying to get at is how you intend to offset the dis-synergies [ph] of having to create corporate overhead structure for each of the separate companies.

Yes, absolutely. We've actually done a lot of work and thinking on this front. It's important to both BWXT and to PGG as stand-alone businesses that we, a, don't increase the base cost structure we have in the businesses today, and b, actually look for opportunities to drive down the cost structure in the short run and in the longer term. So initial work that we've done so far, would say that we're pretty comfortable. We're going to be able to keep the cost structures at least flat post spin, even recognizing that there are clearly some increased costs for having 2 stand-alone companies as opposed to one. It's our belief we can keep the cost structure stable, and I can tell you, over the next few months, we're going to be looking for opportunities to even drive the overheads down a little bit.

Okay. So in other words, you add some in one place but you take them away in another. Is that the concept?

Yes, let me -- there are some costs that are clearly going to be added. We have a little bit different management structure, insurance cost change a little bit. We have 2 listed companies, 2 independent auditors. Those types of things would tend to drive cost up. That said, we're taking a very critical look at our overhead structure, and we're well positioned and ready to make some tough decisions to make sure we have 2 lean companies moving forward.

Okay. And then what would you say is behind the confidence that some of these international power bookings won't get pushed out beyond the fourth quarter? I know you're targeting -- getting some signs and finalizing the fourth quarter.

Well, a couple of things. One, we think we're well positioned on a number of these projects. Any of these large projects take multiple months to come to fruition. So there's an awful lot of dialogue that's gone on back and forth on many projects, one. Two, we are pursuing a number of projects and we're not counting on all of them hitting in Q4 or early Q1 in 2015 because your statement is accurate. International work, even larger projects in the U.S., have a tendency to push out over time. So we don't have a -- we're not dependent upon 100% hit rate. And I think we've progressed far enough on a number of these projects where we have a high degree of confidence that we'll see them at the end of Q4 or very early at Q1 '15.

And we have the next question from the line of John Rogers of D.A. Davidson. John B. Rogers - D.A. Davidson & Co., Research Division: A couple of things. As it relates to the new BWXT and the PGG business, could you talk a little bit about your plans for capital spending with both of those? And I guess, what I'm asking is, is the expectation -- it sounds like on the PGG business, you've got some opportunities or at least expectations that -- for more acquisitions to add to that power portfolio. And I'm wondering about on the BWXT, I mean, is that the thought that that's organic growth and internal investment to drive that?

John, I'll take -- I'll comment on PowerGen and I'll ask John to comment on BWXT. So in regard to CapEx, a couple of thoughts. Baseline, normal CapEx, non-acquisition, we don't expect to change significantly between the business units going forward relative to what we're spending today. I mentioned on the Power Generation side that we have a new facility in India. That facility, for the most part, is built and stood up and any CapEx is already in. So we don't expect any change in CapEx from Power Generation and we'd expect it to remain relatively low. In regard to the potential for acquisitions in the future, right? I've talked a lot about the organic growth we expect in PGG and our focus on growing the business using our existing technologies. That said, there -- I do believe there's opportunity for acquisition as we move forward. And I believe that from a balance sheet perspective, even though we haven't defined all the numbers at this point, we'll be well positioned to execute on those if we choose. They could look like an industry consolidation play, that could be an opportunity. It could look like another MEGTEC-type deal, where we expand industrial environmental in a new naturally growing market that leverages the technology base that we have today. So I think we're well positioned in PGG for both organic growth and growth via acquisition as we move into the next couple of years. John?

Yes, I would say very similar set of comments for BWXT. We have certainly some baseline capital in the business, dealing with upgrades and -- of plants and equipment. I really don't see anything materially changing on that going into the future. All the items that we discussed in the prepared remarks and the other comments I made about the missile tube program, things along those lines are organic. They're bidding opportunities and growing through bidding and capturing additional work in and around markets that we are in or nearby. And there's always opportunities for acquisitions. We don't have anything specific right in front of us at this particular moment, but we don't keep our eyes closed to the market either. And if we can do something smart that creates tremendous shareholder value, we will pursue that opportunity. We're not going to acquire just for acquisition's sake or volume's sake. It would have to be a significant enhancement towards value. John B. Rogers - D.A. Davidson & Co., Research Division: But -- and John, that would primarily be government services companies that you'd be looking at or -- I mean, I guess, I'm thinking more about the commercial nuclear.

It's certainly our core. It's certainly our core, John. We obviously -- we try to append some commercial activities with that just to give us a little bit more balance in the portfolio of things that we've been doing. We've had some limited success in that area, but it would certainly be our intent to stay with our core. John B. Rogers - D.A. Davidson & Co., Research Division: Okay. And then lastly, if I could. Quickly, did you look at other options besides the breakup and how extensively?

Yes, we've looked at options continuously since we stood B&W up as a public company. It's been an ongoing evaluation. And we've looked at many, many options beyond the spin, but at the conclusion at the end of the day, we felt that this was the best alternative to enhancing shareholder value.

And the next question comes from the line of Adam Thalhimer of BB&T Capital Markets. Adam R. Thalhimer - BB&T Capital Markets, Research Division: I just want to focus a little bit more on Q4 specifically. What could get you more towards the bottom end of the range, towards $1.75, for the full year? Would it be revenue falling below expectations or margins taking a step back in PGG? Or is there something else that's embedded in your guidance that we should know about?

Sure. While I would prefer not to be there and we're certainly targeting the high end and that's -- we feel pretty good about Q4 and that's one of the reasons we took the low end of the guidance this quarter. There are always inherent risks in our business. We have project performance issues that could move to a $3 million. We have project closeout opportunities, right? A downside risk could be a project closeout opportunity and our ability to release either contingency or warranty, shifting from Q4 into Q1, simply because of timing. But those are normal risks and we factor those into our thinking as we move into the quarter, and we feel pretty good about Q4. Adam R. Thalhimer - BB&T Capital Markets, Research Division: Okay. And then the other question, I just wanted to ask about your thoughts about the buyback between now and the split middle of next year.

So multiple things for us to think about on that front. We mentioned that, that will remain an opportunity. We'll continue to evaluate the marketplace. I mentioned that we're going to do some more work in the coming months as we think about capital structure and making sure that we spin 2 very strong and stable and well-funded companies as we move forward. And then, obviously, we'll continue to look at the market price of the stock relative to what we think it's worth. And we'll put all those together and decide if it makes some sense for us to enter the buyback market in the next few months or not.

And we have a question from the line of Tate Sullivan of CLSA.

Follow-up on the repurchase. So the split process does not prevent repurchases. Just want to confirm that. And then can you talk a little bit more about the MEGTEC revenue contribution? Is it still -- did you say greater than $200 million next year? Can you just talk about that a little more?

Sure. The spin process by itself does not restrict us from buying back stock if we choose to do so. We just have another set of variables to consider, which is, 6 months or 7 months from now, we'll have 2 stand-alone companies that we want to make sure are very well funded and stable as we move into the future. But there are no formal restriction in place on that. In regard to MEGTEC, again, we continue to be very happy with the MEGTEC acquisition. MEGTEC continues to perform at or better than our pro forma projections. We are anticipating MEGTEC revenue a little bit in excess of $200 million as we move into 2015, and we continue to expect EBITDA margins on that business 10% or perhaps even a little bit more.

Okay. And just a quick follow-up. I mean, can you talk -- you have no leverage planned in the PGG, but then, I mean, what is optimal leverage of BWX?

Right now, what I indicated is we expect to spin PowerGen group with no debt, right? We'll work through all the details of that in the coming few months. And then I'm going to hold comments for now on optimal leverage ratios for both PGG and BWXT, but we'll be prepared to talk about that at or prior to the spin.

And we have a question from the line of Jamie Cook of Crédit Suisse. Jamie L. Cook - Crédit Suisse AG, Research Division: I guess most of the questions have been asked already. I guess, just 2 questions because, I mean, as we think about the split, Jim and John, I feel like both of you are really stressing sort of growth opportunities that both companies can accomplish better as stand-alone companies versus together. Is there -- have either of you sized the market opportunity that you're not addressing right now, so investors can get a feel for the potential size of the market? I mean, John, you mentioned a couple of contracts. Jim, you mentioned internationally broadly but there's no numbers behind it. And I guess, just my last question, Jim, you sort of spoke about PowerGen and consolidation longer term. You didn't really address BWXT technologies. And I guess, as I sit here thinking why should BWXT be a stand-alone company, a much larger industrial conglomerate could easily fund mPower. They would like the high returns, stable characteristics of the business. So if you could comment on that.

Sure. So let's start off with just the size of the growth opportunities, speaking from the PowerGen perspective. We do see a lot of opportunity. We haven't put out any market size numbers internationally. We could -- we've certainly done some of that work internally. The market size for us is a little bit of an interesting discussion in that there's some awfully large numbers about Power Generation market size going forward. But there are also an awful lot of opportunities that we're going to pursue not -- that we're going to decide not to chase in the future just because we're not sure we'll be competitive and we don't want to be bidding very low-margin projects. We're going to try to be -- we're still a -- although I think we're certainly of sufficient size to be strong and stable and to be able to bid on what we want to going forward, we're also not so large that we have to chase revenue just to chase revenue. So we're going to be very targeted in our markets going forward which probably makes it a little bit more difficult to market size opportunities either for fossil, coal-type work in Asia or waste-to-energy all over the world. We're seeing opportunities in Europe, the U.S., South America and Asia. So that's a little bit of comment on market size. MEGTEC's another -- very different business model for us. It's a naturally growing market, industrial environmental. We have an extremely small market share with MEGTEC and that does provide a lot of upside opportunity for us in the future. But we haven't put numbers on the markets. We'll think about that as we go forward.

Yes. Jamie, as far as BWX is concerned, we gave you a little bit of flavor on some of the opportunities in terms of magnitude and size, and there is a broader addressable market for the company that we'll continue to pursue. We have a -- we plan to give a roadshow a little bit closer towards the spin. We'll give you a little bit better insight at that particular point in time about what we'll do in each one of these areas and be happy to address it then. As far as your concerns about the desirability of BWX, we desire it as well. I mean, it's a wonderful business. It has tremendous stability and great cash flow, and it's an extremely valuable thing to our shareholders. And we treasure that and our shareholders do, too. That being said, if someone feels that they want to consider that, we're always open to an idea, but we have nothing planned at this particular point to somehow sell or otherwise disposition the business. We think we can significantly enhance the value to our shareholders from where we will proceed, and that's our plan.

And now I'd like to turn the call back over to the management for closing remarks. Thank you.

Thank you for joining us this morning. That concludes our conference call for the third quarter. A replay of this call will be available for a limited time on our website later today. Also available on our website is a company overview with additional information that will be shared with investors and analysts during various meetings throughout the quarter. We will also be adding shortly a deck that provides a little more information on the spin, as we discussed it in this morning's call. Thank you again for joining us. See you next quarter.

Thank you very much, ladies and gentlemen. That now concludes your conference call for today. You may now disconnect. Thank you.