Welcome to the Third Quarter FMC Technologies Earnings Analyst Call. My name is John, and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. Now I'll now turn the call over to Brad Alexander. You may begin.

Thank you, John. Good morning, and welcome to FMC Technologies Third Quarter 2013 Earnings Conference Call. Our news release and financial statements issued yesterday can be found on our website. I would like to caution you with respect to any forward-looking statements made during this call. Although these forward-looking statements are based on our current expectations, beliefs and assumptions regarding future developments and business conditions, they are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by these statements. Known material factors that could cause our actual results to differ from our projected results are described in our 10-K, 10-Q and other filings with the SEC. We wish to caution you not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any of our forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. Beginning in the third quarter of 2013 and in conjunction with management's efforts to accelerate the development and commercialization of subsea boosting technology for subsea markets, we are now -- we now report the results of Direct Drive Systems technology within our Subsea Technologies reporting segment. They were previously reported in the Energy Infrastructure segment. This movement negatively impacted third quarter Subsea Technologies' margins by approximately 50 basis points. We filed an 8-K on October 16 to provide investors with historical financial information on the movement of Direct Drive Systems technology. I will now turn the call over to John Gremp, FMC Technologies' Chairman and CEO.

Good morning. Welcome to our third quarter 2013 conference call. With me today are Maryann Seaman, our CFO; and Bob Potter, our President. I'll discuss highlights from the quarter, Maryann will provide specifics on our financial performance and then we'll open up the call for your questions. But before I start my prepared remarks, I'd like to knowledge Bob Potter. Today will be Bob's last earnings call, as earlier this month we announced his retirement after 40 successful years at FMC. Bob has been a key contributor to the company's success and he was instrumental in helping the company triple in size from 2001 to today. Bob's experience and vast knowledge of the Energy business will be missed. Thank you, Bob, for your significant contributions to the success of our company. Now to comment on the results. Earnings were $0.49 per diluted share for the quarter. Total company quarterly revenue was $1.7 billion and operating profit was $214 million. Subsea Technologies inbounded $1.7 billion of awards in the quarter with revenue of $1.1 billion, an increase of 20% over the prior year quarter. Our Subsea Technologies operating margin of 10.8% for the quarter is disappointing. This is largely the result of a shortfall in the Eastern Region where we experienced higher project completion cost and slower progress in optimizing our cost structure. In the Eastern Region, we experienced execution issues on legacy projects where we incurred higher-than-expected costs for rework, liquidated damages and cost overruns, all of which negatively impacted subsea margins. Also, the steps we identified to reduce structural costs in the Eastern Region are taking longer to implement and we're just now beginning to see the benefits of these actions. As the margin profile of our backlog continues to increase, when we complete our ongoing efforts to optimize…

Thanks, John. Net income in the quarter was $116 million and included a $9 million charge or $0.04 per share related to the Multi Phase Meter earn-out obligation. Subsea Technologies operating profit was $121 million in the quarter, a 10% improvement from the prior quarter. The Subsea Technologies operating margin was 10.8%, which is below what we have been estimating. In the quarter, the Eastern Region experienced both structural and project cost challenges. First, as we have discussed last quarter, we have identified the need to optimize our cost structure. While we have made progress in most of our regions, it has been slower than initially planned in the Eastern Region. Additionally, the Eastern Region also experienced higher project costs to complete some legacy projects, including costs associated with schedule delays. As a result, cost remained at higher levels than forecast and have dampened near-term margins. We continue to actively address this and we'll have the appropriate structure to meet growth requirements. We are pleased with our operational performance in our other 3 regions. Our margins and backlog continue to improve as we inbound new awards and complete these legacy projects. Overall, considering the issues that John and I have just discussed, we now expect full Subsea Technologies margins at approximately 11% for 2013. Our Subsea Technologies backlog stands at a record $6.5 billion. The majority of this comes from projects inbounded since the beginning of 2012, when the margin profile of awards began to improve. These projects should drive our margin expansion going forward, especially when we have the legacy projects behind us and have completed these structural adjustments. Moving to our Surface Technologies results. Surface Technologies operating profit for the quarter was $75 million, a 30% increase from the prior year quarter and sequentially, increased activity, post-Canadian breakup,…

[Operator Instructions] And our first question is from Bill Sanchez from Howard Weil.

John and Maryann, I want to come back on the subsea margin outlook here and just try to reconcile a little bit in terms of kind of what you're seeing now and kind of what you expected, say, earlier this year. I know, Maryann, you have kind of laid out and John laid out some items that were going to improve subsea margin over the course of '13, one being this lighter R&D load that you guys have taken on early in the year, you had accelerated and you were going to get some tailwinds on that. You had those 0 margin projects for CLOV and Laggan-Tormore that were going to be coming off the book, which were going to help. And then you all had talked previously about these absorption of the subsea engineers helping margins as well. Has that actually occurred at this point or is that still something that's to come or has that just basically been cannibalized by these Eastern Region execution issues?

Bill, let me explain more specifically what happened to the subsea margins this quarter. The actual subsea margins of 10.8% were well below our expected margin of 13%. The shortfall, essentially, all came from the Eastern Region in 4 specific areas. It came from liquidated damage charges that we incurred because, towards the end of the quarter, several scheduled dates slipped, triggering liquidated damage exposure. We also incurred significantly higher rework than we normally do for legacy projects in the Eastern Region towards the end of the quarter on equipment that had shipped. And then, as both Maryann and I have mentioned, we had planned and we had put in place significant actions to reduce the overhead costs in the Eastern Region. Those occurred much slower than we anticipated, and are essentially was no positive effect on the quarter. And then finally, what we talked about is this shift in reporting of the segment of DDS. So the -- your point about the things that we laid out before actually all happened, the reduced R&D occurred as we expected, the reduction in the low margin CLOV and Laggan-Tormore projects happened as we expected, although some of the rework that we incurred in the third quarter was indeed related to CLOV and Laggan-Tormore. But the flowing through of the P&L of those low margins occurred exactly as we expected. And then in terms of the cost reduction and overhead, that actually occurred in the other regions. I mentioned in the last quarter that because of some schedule slippage in the Gulf of Mexico, that we need to do some adjustments to the overhead cost structure in the Western Region, those actions were, in fact, taken and the results were as we expected. The shortfall is in the Eastern Region, rework, liquidated damages, that the -- essentially no benefit from the action that has since been taken at the end of the quarter reduced the overhead structure. So the items that you pointed out that we laid out in the previous calls happened pretty much as we expected. What we didn't expect, obviously, was the significant execution issues in the Eastern Region that impacted us in the third quarter.

That's helpful, John. So Maryann, if I look at your full year subsea margin forecast of 11%, that would imply a 13% margin for 4Q roughly. And then we just build up to that 14% to 15% on average for next year, is that fair?

Yes. Bill, you're right. And as John mentioned, when we exclude, if you will, for what happened in the Eastern Region, we achieved the margin guidance that we were expecting for the third quarter. We clearly expect to have those Eastern Region issues addressed. And therefore, given the margins in our backlog, our ability to correct the Eastern Region, we can see a clear path to the 14%, 15% that we talked about for 2014. Again, our margins in backlog have continued to improve, as John mentioned. So yes, you're correct, we're looking at about 13% in 4Q in order to reach that 11% full year.

It's almost like, Maryann, considering you had a 50 basis point ding to DDS that's now running to the numbers and the fact you're keeping this 14% to 15% margin impact for '14, it's also implying you guys, in the base subsea business, are doing better than what the expectations modestly raised, which -- is that an unfair assessment or I'm trying to cut it too fine there?

Yes -- well, perhaps a little bit too fine. But as we think about DDS, we have moved it into the subsea region for the reason why we have acquired DDS and that is to maximize the potential on the pump. And a lot of those costs that have occurred in 2013 for DDS to complete a lot of the development work will go away. So DDS does improve in 2014 as well.

And our next question is from Robin Shoemaker from Citi.

Could I just clarify one thing. First off, on the guidance for 2013, does that include -- the 20 -- $2 to $2.10, does that include the MPM payout charge?

Yes, it does, Robin.

Okay. So on the strong bookings that you've had this year. First off, typically, in recent years, you've had a strong fourth quarter subsea bookings. And given the very strong first 3 quarters of 2013, do you expect that again to be a strong kind of seasonal fourth quarter order number?

No, Robin. 2013 was a year that we characterized by the major subsea awards occurring early in the year. And in fact, when you look at the fourth quarter, there are a couple of big projects that we're getting very close to, obviously, the end of the year now and they could easily slip into 2014. So no, we shouldn't see a whole bunch of awards necessarily because they're not poised to be in the fourth quarter. And that's why, in my notes, I said we should easily beat $6 billion, but that will be because of our ongoing smaller project awards. And quite frankly, it doesn't include a whole series of very large awards, which I think it's correct given that there's only a few out there and we're getting towards the end of the year.

Okay. Now on the strong backlog going into 2014, I think you've said historically that about 60% of backlog at year end converts to revenue in the following year. If that was the case, then your revenues from out of backlog would be up considerably more than 50% next year compared to 2013, plus customer support, plus book in turn. So I guess my question is, is there any reason why you wouldn't have that kind of 60% conversion of backlog in 2014 given the nature of the backlog that you have?

Yes. Robin, there is a couple of very specific reasons. What's currently in the backlog is Petrobras pre-salt awards that includes 2 major tree awards totaling up over 127 trees and then the recently announced manifolds, which was -- we announced 11 and prior to that, we had announced 3. So our backlog is very heavily loaded with a lot of pre-salt work, which consists of 4 years’ worth of requirements. They're going to be shipped over multi-years. We've never had a backlog complexion like that before. And therefore, the 60% conversion is not appropriate. We think it's somewhere between 50% and 55%. The other thing that's happening is we've received some awards a little later this year that also will be difficult to convert in 2014. So we do not expect the 60% conversion rate primarily because of Petrobras and also because of some of the success we've had later this year winning some big projects that won't convert much in 2014. So it needs to be, I think, in the 50% conversion rate would be a good number to use.

Our next question is from David Anderson from JPMorgan. John David Anderson - JP Morgan Chase & Co, Research Division: Regarding the Eastern Region, how much of your backlog that's converting into revenue over the next, call it, 12 to 18 months is out of the Eastern Region?

Dave, about 40%. We booked the Egina award earlier this year, and that's a big piece of it. So about 40%. John David Anderson - JP Morgan Chase & Co, Research Division: So in terms of your highlighted, really, kind 2 dynamics here in terms of the execution issues, you talked about the structural issues and the project related. Can you help us understand the timing of both of those? How long do these take to get resolved? Obviously, we had the Laggan-Tormore and CLOV issues last year. Are we talking something similar on the same kind of time frame here? Can you just kind of help us understand how these 2 dynamics get resolved over the next -- or however long it takes?

Yes. First of all, the issues I talked about, for example, on rework, that's behind us. There's nothing -- this isn't something that's going to continue through the P&L. Obviously, there's risk of issues, but the rework problems that we incurred on Laggan-Tormore or CLOV are onetime events that happened. So they don't lower the margins and we have to flush things. The same is, quite frankly, is true of the liquidated damages. These are single date slippages that triggered liquidated damages. Part of our plan and what we're putting in place is to significantly and quickly shore up the execution issues in the Eastern Region so we don't have any more slippage and we, essentially, do our best to eliminate any more liquidated damage exposure. So we're not talking about lowering the margins on these legacy problematic projects that we have to live with for quarters as they flush through the backlog. And that doesn't mean that we don't have serious execution issues in the Eastern Region that have to be addressed, and will be addressed immediately. And that's what we're obviously -- what's in our guidance is that we quickly shore up these execution issues in the Eastern Region. And we get back to the 13% margins that we would have achieved in the third quarter and that are required for the fourth quarter to hit our new guidance. John David Anderson - JP Morgan Chase & Co, Research Division: So John, it sounds like you're talking about the kind of cost rationalization issue that you're talking about here. Is this more about kind of just getting poised for the ramp-up in manufacturing so we're at that -- almost at an inflection point right now, you're trying to get all the controls in place, is that what we're talking about?

Certainly, there's some of that, Dave. What we've been anticipating for several years is the ramp-up in subsea. It has materialized. We have back-to-back years, '11 to '12, we had a 30-plus percent increase in industry activity; from '12 to '13, we had a 45% increase in activity. We anticipated that, we've been able to hold on to our market leadership position. We made the investments over the last 2 years in preparation to execute at that much higher level of activity. By and large, those investments are paying off. All the other regions are executing at a much higher level of activity than we've ever done in our past, and I'll give you just a reference. The number of subsea trees that we have delivered at the current rate is almost 2.5x what we delivered 2 years ago. And in fact, that number of subsea trees we're delivering that demonstrated ability to deliver those is about in line with what's required for 2014. So the anticipation of the market growth holding on to our leadership position, the investments we've made, by and large, are making our organization -- are allowing our organization to execute at the higher level that's required, with the exception of the Eastern Region. And it's twofold, they're not executing as well, which is why we had the rework issues, why we had the liquidated damage issues, and that is what has to be fixed. And we will fix it. It's the highest priority in the organization. We're going to get the Eastern Region to execute at the level that the rest of the organization is. The other factor is the cost structure in the Eastern Region is not where we want it to be going forward, and thus we've taken those steps. Unfortunately, they were implemented at the end of the quarter rather than the beginning of the quarter, like we had planned, and those will be -- those will flow through the P&L in the fourth quarter. Quite frankly, we're not satisfied that those actions are enough and we're deepening the steps that we're taking in terms of lowering the costs, and those actions will be implemented -- those additional actions will be implemented in the fourth quarter and to some extent, in the first quarter. So my point is we are extremely well positioned because the market growth, the investments we've made, the execution that we're demonstrating in the other regions positions us to be on target with the guidance that we gave, not only for the fourth quarter, but for 2014. But it's dependent upon us fixing the execution issues, which we will do.

Our next question is from Ed Muztafago from Societe Generale.

Just wanted to focus a little bit on the Surface business. Obviously, that's been performing, I think, a lot better than we might have expected. Do you see any risk to Surface in the fourth quarter from a slowdown in the North American market? I mean, that's something that the service companies have been kind of calling for here as we go through the quarter.

Ed, not really. I mean, the strength of our service market right now is coming from international, both in Europe, Africa and the Middle East. And we don't see any slowdown in that at all. So the risk is in North America and we believe it's stable. Yes, it's at a trough and we're not -- none of our guidance numbers assume that there'll be an uptick, but we don't see any degradation. I'll let Bob Potter make a comment on North America activity.

Yes. Just to add to that, keep in mind, Canada is beginning into its winter drilling season, which should certainly help our Completion Services business, and take it back to its traditional levels of volume. Added to that, even though the rig count is fairly stagnant at the trough, as John alluded to, we're still seeing some impact of drilling efficiencies, pad drilling, more wells per rig, which are certainly helping our repair and replacement business and our fluid control business to remain pretty stable. No CapEx orders are expected this year. And quite candidly, what we're hearing from the service companies is that their level of capital spending next year will be about the same as it was in '13. So we're not banking on that, but we do see some opportunities to begin to claw our way out of the trough in the North American business going forward. Couple that with the fact that international continues to do very, very well in both our Eastern and Asia-Pacific regions, and we believe that the Surface Technologies part of our business is well positioned.

I wanted to follow up, actually, ask on the boosting projects a little bit. Because I know, the last time when we all talked, that you guys were still optimistic that Moho would occur this year. And just kind of wondering if you could give your thoughts on potentially where we stand if you think those projects may all slip into '14?

Right. There were 2 projects that we're targeting for our helico-axial pump, one was Total Moho and the other is Eni 15/06 project. Total Moho, we are unlikely, Ed, to win. As you know, Framo was the incumbent. Although we were qualified from Total, just the timing of the project and so forth, it looks like we're probably not going to be successful on Total Moho. Where they are in their award, I don't actually know. With regard to Eni 15/06, where we are in the running and we're qualified for our pump, has been deferred to 2014. Now there are a number of projects in 2014 for both boosting, hence 1 or 2 for separation, about 4 or 5 projects in 2014, and we'll obviously hope to get a pump award during that year.

Our next question is from Ole Slorer from Morgan Stanley.

So to get back to the subsea margins again. I mean, it is probably the most important thing with respect to your stocks. So when it -- I wonder, when you mentioned that the cost structure implemented at the end of the quarter rather than the beginning of the quarter, could you just sort of explain a little bit more detail what exactly this that you're trying to achieve? Is it a business that's too big for the current order volume that's catching up? Is it undersized and it invest more, it needed to take our people, ultimate? Could you just share a little bit more on why you're so confident that you're going to bring these margins higher?

Right, Ole. When we anticipated the market growth, which I described earlier, and we took the steps 2.5 years ago to add capacity and add talent, it wasn't immediately obvious or clear where that load would actually land. So we made the investments over the course of the last 2.5 years. Now we see the backlog actually materialized. It's materializing somewhat differently than we originally anticipated. The Eastern Region backlog is down almost $600 million from where we expected. As a result, we need to make an adjustment to the cost structure in the Eastern Region. This is something that we anticipated. We knew when we made those original investments that there have to be adjustments along the way. The disappointment is that we identified those adjustments 4 and 5 months ago, put things in place, which included specific headcount reductions in the Eastern Region, that we fully anticipated to put in place early in the quarter so we would see some of the results in the third quarter. In Norway, it's particularly hard to make some of these changes and it took longer than we -- despite our best efforts, it took longer than we anticipated. Those changes have now, in fact, been implemented. And therefore, we're confident that they will appear in the fourth quarter because they have been taken. But to ensure that we get the cost structure right, we have decided to take additional cost structure changes, which will be implemented also in the fourth quarter and early next year. That, coupled with our focus on improving the execution issues that we're now experiencing in the Eastern Region, is what gives us confidence that the Eastern Region financial performance and execution performance will start to model and look like what we're achieving in the rest of the world.

Okay. So you now feel totally happy that the first kind of initiative is resulting in the improvement that you had expected?

Ole, there's nothing happy about this. But we are -- yes, we're convinced that the actions we took there in place, they're done. So you can't reverse them. They're done and they'll show up in the fourth quarter. Our challenge as a company is to take the aggressive steps both in terms of shoring up the organization so that they can consistently execute the levels that we expect, and to push harder so that we don't see any delays in additional actions that we plan to take.

Okay. And if you don't look at that part of it and in context of the legacy project costs and the liquidated damages, how important that each one of these 3 in terms of -- to get right in terms of achieving your margin uplift?

Well, I think they're all -- I mean, they're all equal. The cost structure is completely within our control. We know exactly what we need to do and we need to get on with implementing it. And it's very important, because if we don't get the cost structure right, we'll be living with that in the next year, which is unacceptable. The general execution issues though are also important not only for financial performance but because of our performance to our customers. And so I would say they're all equal. We can't afford, and we have no intention of living with rework -- rework events of the magnitude of what we experienced in the Eastern Region. Now I have a lot of -- I have confidence that a lot of the rework and some of the cost overruns that we've experienced are associated with these legacy projects, which have been problematic for us for over a year. And those are -- those will flush out through the backlog. New projects like the Total Egina project is very different than these legacy projects. We were well prepared for it, the supply chain is lined up and it looks a lot more, in terms of execution, like our Total Pazflor project where we were very successful in execution. So to answer your question, I think all 3 are important, we need to achieve all 3. And as I said, we know what we need to do to get this fixed.

So project are getting larger as a trend and -- which means that delays become also more tricky to manage. So what are you doing in your organization with respect to addressing the risk of ongoing projects slippage? Are you designing contracts differently than what you did before, are you building in other contingencies in the organization to deal with this?

Well, all of those, to some extent, when we look at a large project, we look at all of its risk, we look at technical risk, operational risk, financial risk, commercial risk. Clearly, that continues to improve throughout our company. But the fundamental thing on these larger projects is just good execution. And what we're doing there is we are strengthening the management team in the Eastern Region so we can be more successful in executing these larger projects. We're redirecting our global resources, some of our technical talent, our project management talent, supply chain talent, redirecting it to the Eastern Region so we can have more experienced capacity to ensure that these big projects are executed well. So these are the kinds of steps that we're taking in the Eastern Region to ensure that small projects or large projects are executed well.

And just finally on Brazil. Can you give us an update on the performance on your subsea separation, water separation system there?

Ole, largely no change. The separation -- the Marlim separation pilot system continues to operate fine, no issues. We are actively working with Petrobras on their assessment of how to apply this new technology to the Campos Basin. I'd love to give you kind of a time frame as to where we are, Ole, I don't know that. All I can tell you is that Petrobras is very active in figuring out how they're going to apply this new technology in those fields, and we're helping them with that. There's really no change other than it's moving forward.

Our next question is from Bill Herbert from Simmons & Company. William A. Herbert - Simmons & Company International, Research Division: John, can you -- do you hazard a guess as to when Block 32 is going to get awarded?

Well, Bill, that project is the largest project ever in subsea and it's in West Africa, so we should be careful about picking a date just because it's bound to be -- to go through delays. I will tell you from the bidding process and the discussion in terms of clarifications, it's all moving forward. So that's all I can tell you. It's just so big. I mean, what they're saying -- probably, what they're saying is the order will occur in 2014. But it would be naive to be overly confident on that given its size, its complexity and its nature of being in West Africa. William A. Herbert - Simmons & Company International, Research Division: We haven't talked about this, but I was curious as to whether you could update us with regard to leading-edge subsea pricing.

The subsea pricing improvements continues to improve as these awards, and as we've talked about before, significant awards in 2013 start landing in the backlogs of the various subsea suppliers. The competitive intensity continues to be reduced. As I mentioned, our margins and backlog for almost 10 quarters now has continued to improve, reflecting the better pricing environment. I know I'm hopeful that the projects that will be awarded -- any large projects awarded at the end of this year and in next year should reflect improved pricing. Now how high and how do we get to peak and that sort of thing, I think we've got to let it play out. But we know that 2014 awards are not insignificant. And coming off the heels of 2 very large years, with all the suppliers' backlogs getting filled up, I'm still convinced that there's room for pricing improvement in the market. William A. Herbert - Simmons & Company International, Research Division: With regard to the pricing for 2013, have you been pleased with the realized pricing? Has it come in line or have you been sort of modestly disappointed relative to your expectations coming into the year?

There were a couple of suppliers that I expected to have more pricing change around mid-2013 based on my judgment of how their backlog filled up. And I missed that. Meaning, I -- they continue to price aggressively well beyond what I expected their capacity to be. And therefore, I'm disappointed in that. William A. Herbert - Simmons & Company International, Research Division: Got it. Back to Surface, which a couple of folks have observed correctly that -- I mean, the margin performance there has been really rather considerably better than when most of us had expected coming into the year. And even throughout the year, you guys have really continued to over-deliver on that front. So I guess within Surface, where are surface wellhead margins relative to prior-cycle peaks right now?

They're -- again, Bill, our strength in surface wellhead is international. We have very strong positions in the Middle East and in Europe, Africa. The competitive intensity is less so than in North America, where you've got a lot of small mom-and-pops. So we are benefiting from the growth in surface wellhead international and we've seen pricing improvement in both Europe and Africa and the Middle East versus prior years. William A. Herbert - Simmons & Company International, Research Division: Right. Because, I mean -- I guess what I'm getting at is that within the framework of Surface, it seems -- I mean, I can't recall your surface wellhead margins, I know you don't disclose this but we triangulate back into them. I don't recall seeing them as robust as they are currently running to deliver a 16.3% margin for Surface overall with flat fluid control in the quarter. Is that a fair statement?

Yes. Well, one of the things you're seeing is the fact that our international surface wellhead business is really transformed in the last couple of years or so. And we're supplying a tremendous amount of what I would call high-spec wellhead, a lot of large bore clad equipment, as we provide some of these markets that are looking at natural gas as an indigenous power source. So we're seeing a fairly pronounced shift in the kinds of wellhead systems that we're providing in some of our key markets. That, coupled with the fact that some of our recent strength is coming out of a, what I would call, a rebirth in the North Sea over the last few months, it's a different type of wellhead environment that we're in relative to the past. And therefore, a little bit difficult to compare margins in terms of what we're doing today versus what we may have been doing in the past. William A. Herbert - Simmons & Company International, Research Division: Last one for me. You have persistent with your prophesy of 14% to 15% margins for subsea for '15 -- for '14, sorry about that. For Surface Technologies, it looks like you're going to average something close to mid-teens for the year, assuming margins continue to improve into the fourth quarter, and it sounds like they will. Should we expect something better than that at this stage for 2014 average margins for Surface Technologies?

Yes. Bill, so you're right, we're looking at mid-teens for full year for Surface Technologies. As I think we mentioned earlier, and you clearly stated, we're seeing good strengths in the back half of the year. As we think about next year, still too early really to call what's going to happen with North America, so we're not expecting a significant uptick from this year. So we would expect, on average, right now, that we would see similar margins in '14 as we see full year in '13 in that mid-teens level.

Our next question is from Doug Becker from Bank of America.

At the risk of flogging a dead horse, do want to touch base on Subsea Technology margins again. You mentioned that you were expecting 13% in the third quarter. The previous guidance would have implied 16% in the fourth quarter using that logic. I want to get a better handle on the reconciliation between that 16% using fourth quarter margin, using the old guidance and the 13% or so that's implied versus the new guidance, particularly given that it sounds like the rework is somewhat done, at least the first part of the optimization, the cost structure is done. There seems like there's 300 basis points there that, at least in my mind, needs a little help explaining.

Sure. Let me try to help triangulate that for you. So you're right, as we talked about, we were expecting kind of in the range of the 13s for the third quarter. And as I mentioned earlier, if you will allow to eliminate the challenges that we had in the Eastern region, we were able to achieve those margins. You may remember, last quarter, we said about 12% to 13%. So you're right, in order for us to get to that high end, we would have had to approach closer to 16% in the back half of the year -- or excuse me, in the fourth quarter. Absent -- and clearly, a lot of things would have to go right to reach that. The things that are working, as we talked about, is the lower concentration, if you will, as we complete the legacy projects in the quarter and again, expected in the fourth quarter, they are less than 0.5% of our total contribution. So in general, we've got a better mix of projects coming through. Our subsea services in the third and fourth quarter, as we talked about, are stronger and that is happening as we expected and similarly, our R&D. So we are expecting in the fourth quarter to be able to achieve the cost reductions in the Eastern region. But certainly, we expected that to happen in the third quarter. So we are being cautious with respect to the fourth quarter margins to ensure that -- pardon me, to ensure that we are able to achieve both the cost reductions and get the execution adjustments made in the fourth quarter.

Just so I -- to make sure I understand correctly, you're suggesting that the main difference here is that -- it's the additional cost optimization that's really the focus on the fourth quarter, the difference between the 16% from the 13%?

That's correct.

Okay. And if we could take a look at 2014 just a little bit, we rate the 50% to 55% backlog conversion. For services, is $1.5 billion in the ballpark and for booking terms, something around $550 million in the ballpark?

Service number might be a little high. But yet, it's close, both of them.

Our next question is from Jud Bailey from ISI Group.

I wanted to ask actually about subsea services. This is a segment that you guys have been positive on in the past, and I think you had guided -- this year, you're expecting roughly 10% growth. And I wanted to see has that business been in line or better than kind of your expectations this year? And how should we think about that business in 2014 and the various drivers in which we focus on there?

We're achieving the 10% growth, but we would expect that because, over our traditional subsea services, the subsea market is growing by that amount. And we'd expect the same thing in 2014. So the conventional services that we provide in subsea services is growing in accordance with the market and should easily achieve a 10% rate. What we've been bullish on and optimistic about is the new services that we're providing. Now the timing of that is a little more challenging to predict, but that's on top of the conventional services that we provide today in those growth rates. As you know, we're -- we've got 3 Light Well Intervention stacks in service, they're all performing very well. We have launched the development of a fourth stack. It will be completed sometime next year. We're confident we'll successfully contract that. That will be additive to the service revenue. There's others -- components of our service strategy that will start to kick in. So yes, I think things are behaving as we thought they would, both in terms of conventional subsea service growth and the new services we're providing. Just want to watch the timing of the new services because that reflects the industry's adoption of some of these new technologies. But is it going to happen? Sure, absolutely.

Okay. I would have -- I guess, with some of the new assets you have coming in online, I would have thought, next year, you could have had better growth perhaps, and even into '15. Would the bias be higher than that 10% given the big amount of work you have coming in 2014 and '15?

I don't know. I mean, the big assets that we're adding is the Light Well Intervention stack. It doesn't come on line until the end of '14. We're not going to get stacks 5 and 6 beyond that until 2015 and beyond. So I think it would be a mistake to be too optimistic about how much those additional assets come on stream in terms of revenue additions, certainly for, like, 2014.

Okay. Next question would be on looking into next year in terms of your hiring needs. You've said in the past that you were pretty aggressive early in the cycle on staffing up, and -- but I think this year's orders have been probably above expectations. Could you give us a sense of maybe your hiring plans for next year or how much you're going to have to hire to accommodate the strong order growth you've seen over the last 12 months or so?

Well, Jud, the answer is very limited, because we've made all these investments and paid the price, I might add, for adding all these investments almost 2.5 years ago. The hiring that we're most concerned about is that experienced technical talent, which doesn't exist. We made the decision to hire new grad technical talent 2.5 years ago. We added almost 2,000 people in 2011; 2,000 people in 2012. It takes between 2.5, 3 years to get an entry-level engineer reasonably efficient. We made all those investments. And then in 2013, we started tapering off because the investments were made in those earlier years. And so far, year-to-date, we've only added a couple of hundred new people into subsea. And so as you look into 2014, the headcount addition should be fairly modest, particularly in the area of technical talent, which is what we're most focused on. So we've already seen the manpower adds taper off this year, and we'd see only modest growth next year. All those adds were made several years ago.

Got it. Okay. That's helpful. And then my last question is, you announced the award of 10 complex in October. Was that booked though in the third quarter? Was that in your inbound order number?

It was in the third quarter inbound number, Tullow TEN, yes.

Our next question is from Jim Crandell from Cowen.

My questions has been answered.

The next question is from Byron Pope from Tudor, Pickering, Holt. Byron K. Pope - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: You answered most of my questions. But Maryann, I just wanted to get your thoughts on 2014 CapEx. I guess, you have an additional Light Well Intervention stack, but I wanted to just get a feel for how you're all, at this point, are thinking about 2014 CapEx. And then would there be any dynamics with the working capital intensity that would be dissimilar from what you've experienced this year?

Byron, yes. So obviously, we're still working through final 2014 budgeting. But at this point in time, we're expecting similar ranges, probably somewhere in the neighborhood of $400 million. A lot of -- as John explained earlier, a lot of our capacity expansions to meet the subsea growth have been completed. There's a few things that's left to be done but we are, as John also said, talking about or completing our fourth stack. So we'll see some requirements to support the growth in the services business. But right around that $400 million level is probably where I would anticipate at this juncture. But we'll give some clear guidance on that as we get further out, probably in that range to slightly higher. As it relates to working capital, we've been talking about the change that we're expecting. The fourth quarter is still a pretty significant change for us in terms of the working capital that we are expecting. So as it relates to next year for 2014, we believe that the efficiencies that we should be seeing, as we get back on track, that is sitting in an uncollectible position longer than we would expect, should help us to see improvements in the efficiency. Having said that, our top line still will grow. So there will probably be working capital needs. But from an efficiency standpoint, we will improve.

And our final question comes from Jim Wicklund from Crédit Suisse. James Knowlton Wicklund - Crédit Suisse AG, Research Division: Mr. Potter, I would like to say thank you and congratulations. It has been an absolute pleasure to know you and work with you over the many years. And I have no question you will have a fabulous retirement, and I will keep up with you on Facebook. Congrats.

Thanks, Jim. James Knowlton Wicklund - Crédit Suisse AG, Research Division: Guys, one thing we haven't talked about is orders for next year. According to Quest, which we all realized is imperfect, but they're looking at 195 trees ordered by Petrobras this year and only 90 next year. And they say that recently, that the pessimism in terms of order rate, they're getting more comfortable around the bottom end of their projected range rather than the median case. How much do you think subsea tree orders will be down in '14?

Well, Jim, they're going to be -- I think they're -- well, my belief is they're going to be down by the Petrobras amount. Petrobras awarded 200 trees in -- 208 or something, I think, in 2013. The total number of trees in 2013 is going to be somewhere between, as my guess, 570 to 600 trees, minus the 208 means there's 400 others. And so I'm a little suspect on the Petrobras additional trees, meaning, most of their pre-salt requirements have been awarded. They're not under a lot of pressure, in my view, toward a whole bunch more trees. So I would take close to 600 trees are awarded this year and back out, Petrobras, 200. Will we be able to achieve 400 trees next year for the industry? Possibly. The only issue I have is that when you look at the large projects, they're back-end loaded. So if any of those like Big Colombo [ph] or something, if that doesn't make it in 2014, it will be hard to hit 400. And so that's the only concern I would have. I believe that there's certainly enough activity out there to equal both years to be strong years minus Petrobras. But we've got to watch those projects towards the end of the year if they slip in 2015. James Knowlton Wicklund - Crédit Suisse AG, Research Division: Okay. Last question. You were disappointed a little bit in the Eastern Hemisphere orders, about $600 million or so, and so you're overstaffed there. Since you've hit record orders, I would have to believe that the Western Hemisphere has been a upside surprise to you. Is there a cost issue for that as well?

No, no. And there has been upside in other -- including Brazil, has been an upside as well. But yes, you're exactly right, if Eastern Region is down and Total were up, then other regions are above our expectations and that's a plus. That means that -- for me, it's a plus because those other regions are executing extremely well. And that execution performance, I believe, is sustainable. And so our better performing organizations will have a bigger backlog to execute well on, so I'd say I'll call it a plus.

This concludes our third quarter conference call. A replay of our call will be available on our website beginning at approximately 2 p.m. Eastern Time today. We will conduct our fourth quarter 2013 conference call on February 7 at 9 a.m. Eastern Time. If you have any further questions, please feel free to contact me. Thank you for joining us. John, you may now end the call.

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