Welcome to the Flowserve Quarter 4 2012 Earnings Conference Call. My name is Dawn, and I will be your operator for today's call. [Operator Instructions] I will now turn the call over to Jay Roueche. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us today to discuss Flowserve Corporation's Fourth Quarter and Full Year 2012 Earnings, which we made public last night through our press release and Form 10-K filing. As usual, participating on the call today are Mark Blinn, Flowserve's President and Chief Executive Officer; Tom Pajonas, Chief Operating Officer; Mike Taff, Chief Financial Officer; and Mike Mullin, our Director of Investor Relations. Following our prepared comments this morning, we will open the call up for your questions, and more information will be given at that time. Before we begin, I would like to remind everyone that today's call is being webcast in coordination with an earnings slide presentation, both of which are available through our website at www.flowserve.com in the Investor Relations section. A replay will also be available on our website in approximately 2 hours, following the end of today's live call. This replay will remain available for a period of time over the coming weeks. Finally, I would like to emphasize that today's call and the associated earnings material contain forward-looking statements that are based upon information available to management as of February 22, 2013. These statements involve certain risks and uncertainties, many of which are beyond the company's control. We encourage you to fully review our Safe Harbor disclosures contained in yesterday's press release, the 10-K filing and today's slide presentation for more information. Each of these documents can be found on Flowserve's website under the Investor Relations section. And please note, except to the extent required by applicable law, Flowserve undertakes no obligation and disclaims any duty to publicly update any of today's forward-looking statements. At this time, I would now like to turn the call over to Mark Blinn, Flowserve's President and Chief Executive Officer, for his prepared remarks.

Thank you, Jay, and good morning, everyone. I am pleased with our fourth quarter results, which provided a good finish to the year and culminated in our overall solid 2012 results, as we managed through a somewhat challenging macro environment. Throughout the year, we focused internally on our operational efficiency to drive earnings growth while continuing to position the business to capture expected improvement in our end markets, particularly the larger projects that we expect to move to the buy phase in the latter half of 2013. Before highlighting the financial results, I would like to mention how proud I am of the dedication and performance that our employees exhibited during 2012 as we drove our One Flowserve initiative. Through their efforts, we continued to grow our business with a disciplined approach while leveraging our broad capabilities and driving an expense management culture throughout the company. In our industry, bids, bookings and backlog are the critical first steps to delivering successful results for our shareholders. As 2012 progressed, we enhanced our order execution process and increased our discipline and selectivity. The result was not only bookings growth but also a higher quality backlog, both of which came despite larger-than-expected currency headwinds and challenges posed by geopolitical uncertainties. Broadly, we saw solid activity across our major end markets, with the exception of the power industry, which softened. Original equipment orders during the year primarily consisted of small to midsized projects, as our experienced and broad sales organization concentrated on opportunities across all of our end markets, which, in general, saw some growth despite macro uncertainties and declines in certain markets. This smaller yet high-volume business that we earned is a strategic emphasis for us as it leverages our sales and engineering talent, our global platform and aftermarket capabilities. As for large…

Thanks, Mark, and good morning, everyone. Before reviewing our markets and operations, I would like to expand on Mark's comments regarding the progress of our One Flowserve initiative and the leadership structure put in place early last year. First, I'm very proud of the operating leaders and their execution of key initiatives to drive operational excellence and cost management throughout our divisions. As a team, they have leveraged best practices across our platforms, improving functional performance in a number of areas, including order and sales execution, on-time delivery and low-cost sourcing, to just mention a few. We also continued to develop our CIP platform, targeting quality and process improvements, reduced cycle time and lower costs. Approximately 1,700 CIP trained are certified green, black belt and master black belts are currently deployed throughout the company to drive the CIP culture we have consistently invested in for years, and they are providing a solid return on that investment. Additionally, we continue to invest in our associates and have enhanced our organizational capabilities through training, leadership development, cross-business segment and functional development assignments as we look to institutionalize our succession planning, leadership competencies and performance management processes to ensure a sustainable business model. Turning to the year, I am pleased with the progress we have made operationally. Consolidated operating margin improved sequentially compared to 2011, driven by the improvements in IPD and FCD. We expect to build on the progress we have made in IPD as we continue to target operating margins of 14% to 15% for the division by the end of 2015. As many of you know, EPD operating margins were challenged during 2012, both for the full year and fourth quarter, as we continued to ship lower-margin legacy backlog that was booked in the very competitive 2010 and early 2011…

Thank you, Tom, and good morning, everyone. Mark and Tom provided an overview of some of our accomplishments in 2012 and outlook for 2013. I will provide some additional detail on our consolidated results, update you on the progress we are making in the area of cash flow improvement and then provide some color on our 2013 guidance. In spite of the headwinds Tom outlined, we closed out the year with a solid fourth quarter, shipping a fourth quarter record of $1.3 billion and growing revenue by 6.5% on a constant currency basis. We were pleased with our full year revenue growth of 5.3% given the impact of the strong dollar for most of the year. Our growth was in line with the original 5% to 7% guidance despite the significantly higher-than-expected currency headwinds. Full year gross margin was down 30 basis points to 33.3%, impacted by shipments from the remaining legacy backlog. We shipped about $290 million of this low-margin work during 2012, including about $80 million or 6% of sales in the fourth quarter. While we originally expected to ship most of these projects in 2012, we ended the year with a little less than $90 million remaining of this work due primarily to supply chain and customer delays, which is not uncommon. However, we expect the margin impact in 2013 to be down significantly from 2012 levels as we don't expect to ship more than half of this quarter's level in any period during 2013. Fourth quarter gross margin improved 50 basis points from the prior year to 33.7% as operating improvements and a stronger aftermarket more than offset the impact of the legacy backlog shipments. Turning to SG&A, it fell as a percentage of sales by 90 basis points to 19.4% despite an increase of approximately…

Operator, we have now concluded this morning's prepared remarks. If you are ready, we would now like to begin the question-and-answer session.

[Operator Instructions] Our first question comes from Kevin Maczka from BB&T Capital Markets. Kevin R. Maczka - BB&T Capital Markets, Research Division: I wanted to start just asking a general question about your conviction in your top line guidance, mid-single digits, given that bookings and backlog were relatively flat in the year and bookings, of course, trailed off in Q4. What is it that accelerates as we go into the year that would get us to that level?

Well, I mean, a couple of things. When you look at 2012 bookings, one thing to consider. The impact we saw was, one, around our selectivity to drive really value to the company and our shareholders. And also, you saw somewhat of a decline in Europe during the course of the year. So as we mentioned in our comments, that selectivity has really been in place since the first quarter of last year, so we're starting to lap that. Right? That had a year-over-year impact as you look back to 2011. And also, what we do see in Europe is stability, although at low levels, and so we don't expect a headwind from Europe, and then some signs of encouragement in the U.S. economy in the latter half of the year and then just the other markets. So as we look out in the course of this year, we were dealt some headwinds, some at our selection around selectivity. But again, that improves the margin profile in some end markets that we participate that have either stabilized or we see some improvement. So as we -- in a lot of our business, we talked about the aftermarket, which did grow steadily despite those things that I talked about, and our smaller run rate business, which we should benefit from that as very, very good business. I think the issue that it comes down to is the timing of these projects. We do spend a lot of time talking about these projects. But keep in mind, that's about 20% of our business. And we are encouraged to see the FEED work and the pre-FEED work and hope to see them materialize towards the end of the year. But again, that's 20% of our business. It tends to be very competitively bid. When you look at our margin profile, what those tend to contribute to is fixed-cost absorption. But it's really the aftermarket and the run rate business that drives our gross margins. So I think, as we look out, we think we've absorbed some of the things that were chosen on our part and also market-related that we think have certainly abated. We also have proven that we can grow our aftermarket business, which we've done in just about all types of markets over the last couple of years, focused on our run rate business. The improved execution that we've been driving through does bring more orders in because when you take better care of your customers, they respond better to you. Those are all the things that form the foundation of our anticipated revenue growth this year.

Yes. I mean, Kevin, I'd note -- I mean, as Mark indicated, aftermarket is 41% of our revenue base, and you saw about $100 million improvement in that business year-over-year. So we talk about this $2 billion revenue franchise we have in that business, and it's really right there in front of us. So that's a key to that growth, is the continuing to get good growth from the -- from that aftermarket business.

And I would also add in there, Kevin, just to reiterate maybe on some specifics. I mean, the pipeline business in North America is increasing, and that's driven a lot by the natural gas prices and the liquids that most of the players are after. We got good growth in the chemical business, and we continue to see that going forward, particularly in North America going forward because of the feedstock. We also have the Middle East driving the chemical business as they diversify going forward. We do see the larger projects towards the back half of 2013. And as Mark indicated, that's based on the FEED and pre-FEED activity that we've seen so far. I would say the combined cycle power plants across the world are seeing an increase as a result of the natural gas price in the shift there. And I would say, in Q4, the high utilization rates, as I mentioned, created an opportunity for the aftermarket business going forward on the refineries in the U.S. And 2 other businesses, the desal business was a little bit lower in 2012, certainly at the beginning of the year, when we see an increase in that, particularly in the Middle East. Overall, in the solar business, even though that's dependent upon the government subsidies around the world, we are seeing interest in that again, again, in the Middle East. So there are some good favorable signs in terms of going forward. Kevin R. Maczka - BB&T Capital Markets, Research Division: Got it, very helpful. And if I could just ask one more. Can you comment on the EPD margin a little bit more? I know the comp was difficult, but it wasn't entirely clear to me why that margin was down year-over-year with the aftermarket mix actually increasing. And I know you had some bad legacy backlog still remaining there, but you had that in the prior year as well, maybe even more in the prior year.

Well, if you look in the prior year in 2011, believe it or not, EPD still benefited. There was some benefit from the '07, '08 time period. I mean, as you look at our business, we don't tend to cycle as quickly as other industrials. In our business, we saw the full impact of the decline in terms of the pricing environment going into booking and the competitive environment going to bookings in 2010 and the early part of 2011. So some of the effects of '08 in projects that were in bid phase in '09 were still coming through in EPD in the early part of 2011. And in fact, what you saw, you saw their margins tend to trend down during the course of '11 and then reverse that trend to a certain degree in 2012. I think the other aspect of that is there was certainly the legacy backlog that was weighing in there, and it was -- that legacy backlog, again, some of this is -- are good projects that were very competitive in '10 and '11 and that are going to yield aftermarket. But what EPD saw was a lot of their big projects were those legacy type in 2012, and they didn't get to see any of the projects from the '08 era kind of carry through. So we're not, certainly, concerned about their margins. The other thing you saw in the SG&A line is we did invest in the business, in the sales organization, in the aftermarket side. So that's really the EPD story. We -- it will tend to lag what's going on. But if you look relative to some of its peers, very good margins in the business and certainly well positioned to drive incremental aftermarket and also to take advantage of some of these projects that are coming online.

Our next question comes from Scott Graham from Jefferies. R. Scott Graham - Jefferies & Company, Inc., Research Division: I was just hoping that you guys and, particularly, Tom could kind of characterize what you're seeing really today right now. I know you talk a lot about the FEED and the pre-FEED and what have you. The bookings declined on the OE side, I don't think that was a shocker. But I'm just kind of wondering what the tone of OE bookings are right now because we've talked about the FEED and the pre-FEED stuff in it. It just seems to keep getting pushed back a little bit. And what gives you the confidence, Tom, particularly, that you think that this is going to really start to come through in the coming quarters and right through to your bookings line?

Yes, if I can just put it in context and just look at the full year first in context, I mean, if you look at oil and gas, the oil and gas for the full year was up. Chemical was up. General industries were up. The only industry that was really down for the full year was the power business. On the oil and gas, we indicated that a lot of -- even though it was up, a lot of the large projects still were not coming through relative to the EPCs. And we see a lot of that FEED and pre-FEED work as a precursor to the EPCs getting into the buy phase. And I also think that you've seen that in some of the EPCs that have recently gone through some of their investor calls. They've talked a lot about the FEED and pre-FEED work being up. If you look at the regions, again, what gives me some confidence going forward, the North America region was up for the full year. We still have a lot of pipeline activity going on. The natural gas situation is, I think, creating a lot of opportunities, both on the chemical and the power side. So that looks -- that, to me, looks positive. And we're also seeing that trend elsewhere around the world in general in terms of natural gas, as well as basic liquids. Asia Pacific was also up for the full year. Latin America was up for the full year. I mean, we all expected Europe to have a tough year, and it did. Europe was down. But I think we're seeing some basic, I would say, stabilization, not a consistent, yet, stabilization in Europe, but a basic stabilization. We're seeing some of our quicker-turn businesses, while they're not at the pre-2012 levels, I would say they're getting stabilized in that area. The Middle East was down, but I think we've talked about that in terms of large projects. So in the context of the full year, we see a lot of regions and industries, I think, in good shape. And when you look at the macro dynamics, as we've indicated, we had, obviously, the elections in the U.S. You had things going on in China which have now, I think, sorted themselves out in terms of the nuclear business. The first nuclear power plant has been granted construction since the moratorium has been lifted, so that's good news there. And we're seeing other activities on re-rates and upgrades on the nuclear side. The Latin America had several things going on, and we're starting to see some pickup there in offshore activity in Latin America. So we're seeing some good, I think, basic signs. The distributor business is a business that we look at Q4. The distributor business in the FCD business was up, both in Q4 and the full year. And that's one of the leading kind of indicators for us overall in the business.

So Scott, just a point of reference here. When we talked in early 2009, when folks were very concerned that it was going to drop precipitously, we said we see these projects and they're going to move forward, and they did. So we have the experience to know when you get to this level of investment, the pre-FEED and FEED, and you understand what's underlying these projects and their stories around the world. In Kuwait, they need clean fuels. In Brazil, they need to monetize the reserves that they've acquired. They've just had a lot of projects that they had to digest them. We know these things are going to move forward. From my standpoint, and I talk to customers, and one of the things that's typically at the first part of the discussion are the projects they're going to move forward with. But keep in mind, whether it comes in Q -- from our perspective or theirs, Q3 of 2012, Q3 of 2013, Q2, it doesn't matter necessarily from their perspective. We've been following some of these projects for years, but we do know they need to come online. I think the other thing to the point earlier was that we do -- we tend to spend about 80% of our time talking about 20% of our business, which are these big projects. Focusing on that 80%, the aftermarket business, which has grown; the run rate business, which we've seen grown as we grow our presence, as we continue to execute. I mean, one of the things we saw was good improvement in IPD. That gives us confidence as well. So as we're sitting here right now, we see a Europe which is at low levels. There's no guarantee it couldn't get worse, but it's at historic low levels…

That's well put, Scott. I mean, I think the discussion is not only about bookings, but quality of bookings. And the discussion is also how we take those higher-quality bookings and put them through our facilities, and this is from order intake to cash flow. So we're working on the whole value stream. Now that doesn't suggest, in any way, that we're giving up top line growth because we absolutely didn't in aftermarket. We want to continue -- I mean, those are good rates of growth for the aftermarket business. We want to continue to do it on the run rate. But I think what we'll start to see during the course of this year is the benefits of the One Flowserve initiative, the benefits of the selectivity that we've talked about and some of the focus, the benefits of the improvement in IPD. I think when we were sitting here a year, a year-plus ago, I said with IPD, it's a little frustrating. It's taken longer to get it started. But clearly, we've gotten some very good traction on that, and I think we can start to approach our objectives. So that is a good way of putting it. But what I don't want to leave on the table in this discussion is the fact that we are absolutely focused on growing our top line. But we will continue to do it selective. We could have grown it, even in the fourth quarter, at higher levels without selectivity. We just don't think that's necessary now like we did in 2010 and early -- in the first half of 2011 to load our factories.

Our next question comes from Nathan Jones from Stifel. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: I think I'll start with Tom Pajonas. Can you give us some more color around on-time delivery, working capital management, reduced cost of quality and low-cost sourcing that you've quoted as improving? Perhaps, some numbers around on-time delivery or some examples? So just some color about the effect that, that's having.

I mean, if you look at margins, there's 2 or 3 things that we constantly work on, and that's also part of the overall One Flowserve initiative and the customer focus initiative. And it's really quality and on-time delivery. We've made, I would say, significant and good progress across our businesses in terms of on-time delivery. And again, our -- that has a lot to do with not only cycle time, but this meeting the commitments. And it also has to do with throughput in the operation, which helps out on the working capital. So we've improved on that over 2011, and we'll continue to work on that. Relative to COPQ, which is the cost of poor quality, where we look at warranty, we look at rework, we look at liquidated damages and other things pertaining to the execution, that is the second core of our business, along with the overall scrap in, as well as supplier, cost of poor quality. And we have metrics set up across all of our businesses. We continue and have made progress from '11 to '12 in that particular area, and we're going to continue to drive that forward over the next 2 to 3 years. So on-time delivery, COPQ are 2 key indicators that not only help with our overall customer focus initiative, they basically help with the throughput through the entire operation and allow us to execute a better overall in the business. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: Are there any kind of numbers you could put around like the improvement in on-time delivery? I know COPQ might be a little harder to quantify for us, but has on-time delivery gone from 94 to 96 or...

Yes, I want to kind of stay away from giving specifics because, obviously, there's some competitive numbers in there. But I would say somewhere north -- certainly, somewhere north of 90% is where we're targeting. And obviously, we want our on-time delivery to be 100% if we can, just like the way we look at safety. But we're driving it through these -- the entire supply chain, and you just need to know that we know where our suppliers are. We know who the good suppliers are. As we go into countries and we do low-cost sourcing, we spend a lot of time on the deliveries of those suppliers through the supply chain, through our engineering, through bill of material generation, through our manufacturing facilities. We know where the pinch points are, and we look at the cycle time. And those 2 go in unison. The lead times, as well as the on-time delivery, will always be, again, drivers for us as we move forward.

Nathan, we still have room for improvement, though. I mean, that should come out in this discussion, is that we're still working on improving our on-time delivery. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: And if I could just get one in on the M&A environment. You seem to be talking a little more constructively about the possibility of getting deals done. Can you comment on what the pipeline is like? I know prices out in the market seem to be pretty steep at the moment. And how you're thinking about that?

Well, I mean, I'll start with the second part of the question. In terms of price, we think about returns to our shareholders. And so what can we realize in terms of the value? How quickly can we generate the cash flow? It's really an IRR. So if you -- if there's a business you can't realize a lot of benefits and synergies out of, then that's going to command typically a lower price than one that fits right in and you can leverage up across your sales organization. But I think what you're seeing is we're sticking to what we talked about in terms of a bolt-on strategy or a business, and that really goes to good strategic fit, but also reasonable integration risk as well. And we were very focused internally last year. Having said that, if we would have seen an opportunity -- a bolt-on opportunity that could have delivered good value to our shareholders, we would have done it. We just didn't at that point in time. And the pipeline continues. You'll know -- you typically often see the big ones, but those tend to be less bolt-ons because they're out in the markets than anything else. But we're very focused on making sure we keep certainly a reasonable pipeline of them, like we did in Lawrence. That's been a very good acquisition for us. We've been able to integrate that very well and really leverage that business tremendously. So we'll continue to do that. I think the one thing, though, is we feel, sitting here this year versus last year and even the year before, that we have a better platform to load whatever inorganic opportunity we do find onto.

Our next question comes from Brian Konigsberg from Vertical Research Partners.

Just first on, I guess, aftermarket, so just kind of the outlook for 2013. Maybe you could talk about how much of the growth you're expecting is just from general market growth versus actual share gains? And maybe could you just give us a sense of how penetrated you think you actually are on the customer base and where it could go?

On the aftermarket side?

Yes.

There's still plenty of opportunity on the customer side. I think what you've seen in the growth over the last couple of years are the benefit of our QRCs and our sales network, and some of our ISG strategies have taken hold as well. Now the Dow Benelux example is a good one, where we basically took the business, for the lack of a better term, from our customer, and took over the service. There's still plenty of opportunities like those out there. And so as we look forward, there is -- I think there is an element, as Tom talked about, around deferred maintenance, particularly what you saw in U.S. refineries. That's going to represent an opportunity. Consistently, as we get through -- even in the power industry, we saw a good aftermarket business. But as they go through and make decisions around what type of feedstock they're going to use to generate power, if it's going to be combined cycle in many areas, that's going to be newbuild and that will feed into our OBD business. But if they're going to continue with the fossil, oftentimes, those things are -- or need to be upgraded and re-rated, same thing on the nuclear side as well. I mean, the nuclear occurrence was almost 2 years ago, and you're just starting to see the world start to emerge from that. But the fact is, those facilities need to be kept up and maintained. So I think there's typically a story around that. I also think that we get more flags on the ground in some of the strategic regions, as I've talked to you before. We would like to see a mature aftermarket delivery capability like we have in the Gulf Coast region in the United States and other parts of the world. We've continued to be focused on that. And so that's going to represent growth opportunity as well. So I think there's -- most of the growth that you've seen has really been around our intentional strategies that we'll continue to execute on.

Would you be able to maybe quantify, of the outlook you have for '13, how much of that growth is being driven by the assumption that you get more penetration, Mark?

I think -- I mean, as we look at 2013 in general, we think we're going to -- we expect to continue to execute on our aftermarket business and our run rate business. And to a certain degree, we see some of these projects coming in, in the latter half of the year. And so I think, if you kind of break it down, no, we're not going to give bookings guidance certainly within the aftermarket run rate business or anything like that, but I think that's a general tone as to what we see. And it certainly supports what we talked about in terms of anticipated growth. You've seen good consistent growth in the aftermarket business even despite currency headwinds.

Sorry, I would just add to what Mark is saying, just some items. A lot of coal to gas conversions taking place, pipeline upgrades, you have the nuclear re-rates and upgrades, as Mark has mentioned. We are seeing in China, India, in Russia this, I would say, environmental issues coming to the surface, which may mean changes to the existing plants, which generally translates into some aftermarket work there. And we have continued to add quick response centers in the -- over the world through 2012. We've added one in Russia and Madagascar, India, as well as in China.

And if I may, just actually one more. So just on the other 20% of the business, I know we focused in on a lot. But I'm just curious, so of the opportunities that you guys have, so obviously a lot of petchem being discussed, LNG in the U.S. and some select projects abroad, upstream oil and gas refining, Middle East, South America, how would you rank these projects as far as consumers of actual pumps and valves? Do some consume more than others? Does one segment offer a bigger opportunity relative to the other set? And really, even on the aftermarket, do some of these offer more aftermarket tail than others? If you could address that, that would be great.

Yes. I mean, typically, oil and gas, chemical offer a lot of aftermarket opportunity just because of the types of materials that are going through it. The water industry tends to be less burdened with aftermarket because it tends to be lower RPM, and you don't have a caustic material that's going through it. So I think that's one thing. But as we look at the opportunities in terms of OE, the 20% of the business overall, obviously, a big petrochemical facility, chemical facility, refinery have a substantial amount of our products on them. And it depends on the size and scope and the barrels per day that they're going to put out. And even if you look across the power industry in terms of the availability, the spectrum kind of goes from combined cycle. It does have our products, but not as much all the way over to the nuclear side, where they tend to be certainly higher priced and much more critical. So think about the critical and the pressure in terms of the application and the size of the facility, and that gives you an idea. And so as you look at -- what we like is we like infrastructure that's permanent. So a pipeline is permanent. A refinery is permanent unless they shut it down. Oftentimes, upstream production facilities can certainly move around, as you see with frac-ing pumps. But when we look at certainly those opportunities out there, there are plenty of downstream opportunities around the world in the Middle East. I mentioned earlier, in Kuwait, they need to go through a rebuild, a newbuild and an upgrade effort. And upgrades can be as extensive as a new facility, or expansions can as well. And also, you see -- we see trends up in the power industry as well, so -- and pipelines do as well. Pipelines are fairly extensive. They have quite a few pumps on them. They have valves on them as well. When you look at our Valbart valve, that helps secure a pipeline. These are critical applications. They do have aftermarket that attaches to it. So these can be substantial opportunities. And what you're seeing, even relative to 6, 7 years ago, is these facilities are getting bigger and more complex.

Our next question comes from Joe Radigan from KeyBanc.

Just a couple of questions. Mark, your point on the project business is well taken. But the commentary from the E&C seems to be getting increasingly bullish around the oil and gas cycle, particularly in North America. And I would just be interested in your thoughts in terms of the duration of this upswing when it finally does materialize because there's some pretty lofty numbers, I think, being thrown out there as to how long a tail this is. So I mean, how are you guys looking at it?

We tend -- when we tend to look at that opportunity, I mean, around 3, maybe up to -- extending out to 5, depending on how they stage out. But when they -- certainly, when they come back, that's the way we look at the opportunity when these things come back around.

Okay. And then...

And that's -- by the way, that's how we're planning our business. So when we get together on Analyst Day and when we looked, even when we started talking 2 years ago, that's how we think of our business. It's a great question because that's how we have to think about our business.

And then several of the western E&Cs are already talking about lining up resources for this upcoming cycle. Maybe a 2-part question. First, is that starting to have the favorable impact on project pricing that you would expect as you start -- as you're quoting these projects kind of in the pre-FEED timeframe? And then how does that impact your ability to find and retain engineers in that sort of high-demand environment, given that's part of the value add for you guys?

Well, that's -- let me take the second one. That's a great question because if you drive in Houston, you'll see billboards advertising for engineering and engineers. So it is tied in. I think we've talked about on these calls before, I mean, we've had a fairly -- a very intentional program around engineering recruitment, engineering retention in our business. We've taken a lot of our engineering capacity and put it in engineering centers in India and China so that we have that continuity and that, really, that leverage capability there. So we've certainly been looking at the resources. Going back to your prior question, what you tend to see in our industry -- and the pricing was its roughest in 2010 and early 2011. And then what you see in our industry is capacity starts to rationalize, to a certain degree. You saw a couple of transactions with some of our competitors where there was much more discipline in terms of the way they took the projects. Then as the projects come online, that will tend to drive incremental pricing. And then as capacity becomes constrained, our industry will tend to start using that pricing to rationalize their capacity like you saw really towards the tail end of the last market move in 2008. But again, if we see something like that again, that will be fine and well, although there was certainly a downside to that. When we look at our planning, we don't look and need or expect that type of environment to achieve our objectives. Really, what we want to do is make sure we've got an efficient platform, that we're disciplined. And then as we start to see price not only from the market, but for our ability to execute, we think that's very important because the other thing that can help with price is your ability to drive down cycle times in terms of manufacturing. So we're trying to position ourselves different from where we were before to really start to capitalize on price before it just becomes a market capacity constraint issue. So what you'll see is, as these things start to come online, it'll start to -- you'll start to see pricing improve beyond just the discipline that's come around. And in terms of our preparedness, we're always wanting to get better prepared, but we certainly think we've got the capacity in place to take advantage of these opportunities over that period of time. We'll stay focused on making sure we've got the personnel and the engineers in place to do that as well. And Tom will stay continued focus to make sure that we drive better throughput, as I mentioned on the question earlier, improve on-time delivery, do all those things that can help us capture as much of that as we can. And then when that occurs, and that is 20% of our business, start to reap the benefits from aftermarket.

Yes, and I would add. I mean, one thing that the engineering staff wants to see is they want to see you making investments in your business in terms of technology, and we've done that in terms of research and technology. So we keep things state-of-the-art in terms of that perspective. And we also do a lot of investment in engineering systems, database systems, build materials, 3D modeling. And that also keeps us at the forefront of the technology, which our engineers, again, they respond to.

Our next question comes from Jake Robinson (sic) [Chase Jacobson] from William Blair. Chase Jacobson - William Blair & Company L.L.C., Research Division: It's Chase Jacobson from William Blair. Just wanted to follow up on the revenue questions. So it sounds like you had pretty good conviction that you can hit the mid-single digit revenue growth target with aftermarkets and small- and medium-sized projects. Does that mean that if some of the large projects come in, in the back half of the year, that there could be upside to that? Or do those projects really not contribute to revenue until some time next year?

Yes, Chase, Mike. Yes, those are mainly 2014 revenues. We'll see some bookings, we think, that will come to market in the second half of the year, but those really don't come into meaningful revenues until '14 and '15. Chase Jacobson - William Blair & Company L.L.C., Research Division: Okay. And then just a question on the cash flow. Really strong free cash flow in the quarter. Looking out through 2013, is that -- I mean, I don't know, I doubt the fourth quarter level is sustainable. But is it going to go back to the normal seasonality, where it's kind of lower in the first half and then picks up beginning in the second half? Or is there more room to go on things like inventory in the near term? Any clarity on that would be great.

Yes, there is. And let me just clarify on your previous question. From that revenue, we really see that revenues as '14. We'll see the bookings in '13, but the revenue is really more '14-related.

No, I think there is. I mean, we've still got more work to do on cash flows. We've identified the targets and kind of announced publicly what those targets are. But there's still work to do. We've identified where we need to make improvements. Most of those are process-related and procedure, as well as changing culture in the organization.

We have Sid Panda on line from RBC Capital Markets.

The first question was regarding the DSOs and the inventory turns. Where do you see slack in your operations right now that can help drive the improvement there?

Well, overall, I mean, we ended the year at 75 days DSO and I think around 3.2x turn, and we've indicated our targets. We want to drive that to the -- the DSO to the mid-upper 60s. So that continues to be a multiyear process. And so it's a marathon, not a sprint at all. But I'd say, it's around the world. It's a number of our operations. And also, again, as I've indicated with Chase, we've brought some consulting firms in last year, middle of last year, did a very detailed analysis across the globe and identified process and procedure changes we need to make. And we're in the process of implementing those. So I think the identification of it is kind of the easy part. The more difficult and the long-term piece is actually implementing those changes.

Okay. And the second question was around bookings and, in particular, in FCD. That has seen bookings going down for like 3 subsequent quarters now. How should we think about booking trends in FCD in 2013 and the overall booking trends?

Well, I think as we'd talked about earlier, I mean, FCD has a high exposure to Europe. So a lot of what you saw in terms of their book -- year-over-year bookings decline from 2011 to 2012 was the headwinds that you saw in Europe, which we, again, expect to stabilize. So if you look at '12, there were other things that were bringing bookings up in FCD. It was just primarily offset by what you saw in Europe as well. I think the other thing, as we look out into 2013, we made the Valbart acquisition, which has high exposure to oil and gas. We've got that integrated and working the way we want it. And so we expect to see opportunities in that as well. So that's what gives us encouragement around the FCD business.

Okay. So for 2013, I guess, would it be fair to say that the bookings growth would be led by the Engineered Products, or were the highest organically, followed by IPD and then followed by Lawrence?

Well, and we don't want to break it down individually. But what we're focused on is really driving growth in all of them, and so -- I mean, I think when we look at it, we don't want to go certainly one by one. Now EPD, both the bookings growth will depend on the timing and the nature of those projects. And to a certain degree, it's revenues as well, depending on when those projects come in because they do have percentage of completion. So they could pick up some revenue. But for the most part, the run rate business tends to be shorter cycle.

Okay. And then just because of the way -- and this is the last question. Just because of the way the FCD bookings were sort of down for that first 3 quarters, would it be fair to say that for the mid-single digit growth in 2013, that would be the lowest contributor there, the FCD segment?

No. Again, we don't want to parse them out individually because, keep in mind, we do leverage across these divisions, and these segments as well. So they are participating on oil and gas projects, along with EPD. So no, we certainly don't want to look at it that way. Of course, their bookings growth can be different because of either projects that came through from one period to the next. I mean, if you look in the compares in FCD, they had a large nuclear project in 2011, about $50 million, which is big, that they didn't see in 2012. And also, they saw a fairly large oil and gas project in 2011 which was very competitive. So I don't want to get into too much detail around each one of the segments. But the point is, is we're focused on driving growth, and we've talked about the mid-single digit over on that growth business. What that depends on is continuing to drive aftermarket growth, focusing on the run rate business and, to a certain degree, seeing some of the benefits of these projects towards the back half of the year.

Our next question comes from William Bremer from Maxim Group.

One question. Is there any particular part of your business that you feel as though, at this time, you don't have the adequate capacity, given the end markets that you're seeing going forward? Or better yet, the CapEx that you're sort of providing, can you sort of break down where that's targeted?

Yes, the answer to your first question around products is we think we certainly have available capacity. Now some of our facilities, even at this day, are full. But we -- if you've -- we've talked about our lead products, secondary product strategy. We've been able to move a lot of that manufacturing and leveraging other facilities around the world. So if you would have followed our business build 7, 10 years ago, it was pretty much -- it was fairly product-specific to a plant. We've moved a lot of that over the last 3 or 4 years to be able to develop those capabilities in emerging parts of the world, not only for low-cost manufacturing, but those products are being used in the local markets. So we do -- as I mentioned earlier, we do feel like we have capacity and the ability to manage our capacity now and really with the opportunities we see over the next couple of years. Second part of your question, where our CapEx has gone, a big part last year was in Brazil as we opened that facility and we continued to build in China to serve that local market, and in India as well for products for that local market and to support our operations around the world. We've invested in QRCs. We've also invested some of that capital in R&D and systems to really support growth. So a lot of the CapEx has been growth. And as Mike talked about, we run 50 plus or minus on maintenance CapEx. But also keep in mind, some of that is updating some of our machinery. And if you look at some machinery that it's replacing, they tend to be highly manual, like a manual lathe. And there is -- the significance of that is it's labor-intensive. It is actually subject to a lot of rework because it's -- there's human activity in terms of the precision of the machining. And we've migrated a lot of this maintenance CapEx over to computerized machinery, which is just that. It has lower setup times. So when we get into cycle times in our business, we think about the setup times for castings. It has lower setup times, lower margin of error, higher precision. And so part of that maintenance CapEx is really to position us for the future, as well. So that's how we spend our CapEx.

Mark, can you comment just a little bit -- I mean, that's extremely helpful, and I'm glad you went into the castings. Can you go into pipeline the same way, of how you were -- I mean, we're all seeing the amount and the amount of backlog or the talks that we're hearing on the pipeline side. You guys do have exposure on the pump and the valve size for pipes on both liquids and gas. Are you set up appropriately that if this long-haul pipeline comes through and others do start flowing, are you ready for that? That buildup, that could be a real nice run rate for the next few years in pipeline.

Absolutely. We're ready and looking forward to it. As a matter of fact, it's been happening, so we've been participating in the last year on some of these pipeline opportunities. We like the business. As I made the comment earlier, fixed infrastructure is good for us because, if you think about the customer, they have to optimize it because they can't move it. And so -- and it's commissioned, and it's there and it's permanent. So where they need to spend their time once it's on the ground and running is, how do I improve it? That's our aftermarket strategy. If you look at equipment that can be moved to its next marginal use, that's not as good on the aftermarket side. So we like the pipelines because they don't move.

Ladies and gentlemen, we have reached the end of our allotted time. I will now turn the call back to Jay Roueche for any closing remarks.

Thank you, operator, and thank you, again, to everyone for participating in today's call. We look forward to seeing many of you at the various upcoming investor events and conferences. I think a few people may have been left in queue. And should you have any follow-up questions, please don't hesitate to call Mike Mullin or myself. And with that, operator, it concludes today's call.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.