Welcome to ITT's Second Quarter 2013 Earnings Conference Call. Starting the call for today from ITT is Melissa Trombetta, Director of Investor Relations. She is joined by Denise Ramos, Chief Executive Officer; and President Tom Scalera, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 12:00 p.m. Eastern Daylight Time. [Operator Instructions] It is now my pleasure to turn the floor over to Melissa Trombetta. You may begin.

Thank you, Hope. Good morning, and welcome to ITT's second quarter 2013 investor review. I'd like to highlight that this morning's presentation, press release and reconciliations of GAAP and non-GAAP financial measures can be found on our website at ITT.com/IR. Please note that any remarks we make about future expectations constitute forward-looking statements under the Safe Harbor provision. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in ITT's 10-K and other -- and our other public SEC filings. So now, let's turn to Slide #3 where Denise will discuss our results.

Good morning, everyone. Thank you for joining us as we announce our financial results for the second quarter of 2013. Q2 was another strong quarter for ITT due to our continued financial discipline and focused strategic execution. In the quarter, we extended our track record of delivering solid results on the top line, strong adjusted segment margins and earnings per share despite the unpredictable economic environment. Total revenue was up 9% due to solid execution from our Bornemann Pumps acquisition, which is delivering on all fronts due to the strength of the strategic fit and the quality of the teams' integration activities. Organic revenue was solid at 2%, driven by 12% growth in global automotive that was driven by recent platform wins and significant market share gains at Motion Technologies. It was also positively impacted by a strong 19% growth in global energy that was fueled by focused execution and our expanded portfolio of energy products at Industrial Process. These positive results were unfavorably impacted by significant anticipated decline in demand for global mining equipment. We were very pleased with our adjusted segment operating margin expansion of 70 basis points, which was up 110 basis points when you exclude the impact of the Bornemann Pump acquisition. Three out of 4 segments delivered margin expansion of 180 basis points, reflecting the organizational commitment to advance the Lean initiative that we began a year ago. As we have previously communicated, we are in a unique position compared to other industrial companies as we have identified a significant number of opportunities to enhance customer satisfaction and deliver margin expansion through our multiyear initiative to leverage Lean across our entire enterprise. We are also extremely pleased to report second quarter adjusted EPS of $0.51 per share, which grew 4%. The EPS growth is driven…

Thanks, Denise. Now let's turn to Slide 5. In the second quarter, total revenue growth of 9% and organic revenue growth of 2% reflected the benefits of our strategic execution and our global diversification. Motion Technologies drove the organic improvement with 9% growth. In the quarter, the Motion Technologies team delivered exceptional 9% auto growth in difficult Western European conditions. And they also exceeded our expectations in China by posting 70% growth in the quarter. Organic revenue at Industrial Process declined 1% due to anticipated reductions in Latin American mining, however this decline was nearly offset by our global expansion in oil and gas, which grew an impressive 40% in the quarter and at 40%, excluding the impact of Bornemann. ITT's organic orders increased 8% in the quarter with all segments contributing to the strong performance. Organic orders at Motion Technologies grew 10%, reflecting a 14% increase in automotive from continued global share gains. Organic orders at Industrial Process expanded 8% due to increasing project orders mainly in oil and gas. This performance was partially offset by weakness in our shorter-cycle North American baseline business. Total Industrial Process orders increased 21% due to oil and gas order strength at Bornemann Pumps. And total backlog at Industrial Process of $634 million has grown 10% since the beginning of the year. In Q2, Interconnect Solutions reported its third consecutive quarter of positive sequential order growth with a 10% increase over Q1 and a 4% increase over the prior year. Key wins in medical and defense markets drove our book-to-bill ratio of 1.05, which provides further evidence of the turnaround progress we are making. Control Technologies also posted solid order growth as both commercial aerospace and industrial markets grew 8%, reflecting our intensified focus on directly addressing the needs of customers with highly-engineered…

[Operator Instructions] Your first question comes from the line of Mike Halloran with Robert W. Baird. Michael Halloran - Robert W. Baird & Co. Incorporated, Research Division: So on the ICS margins, obviously, really nice turnaround on the quarter. And I appreciate the detail you gave in the prepared remarks there. But could you talk about the sustainability of the margins from where we stand here? Sometimes these turnarounds have some fits and starts, sounds like you're pretty confident. But I'm curious if this is the right run rate for us to think about on a forward basis?

Mike, the ICS turnaround has been something that we've been focused on for a while now. We've been putting in some systemic changes in that business, particularly when we think about the front end and how we're driving the front-end. We brought in a new leader who came in February. We also have a new operational leader. And both of those individuals, along with the team that's there, have been making some significant improvements in ICS and how we're thinking about the future for ICS. As I said in my remarks, we're focusing on the harsh environment end markets, and we are very, very focused on certain end markets for ICS. Along with that, we are getting some quick hits from some of these manufacturing initiatives with the new operations leader. So while we're getting some of these quick hits, which is why you're seeing a big improvement from Q1 to Q2, the reason that we're getting these hits is because we are making systemic changes within that business. So we expect to see continued margin improvement. I've put out a goal there that will be less than roughly 10% this year but that next year, we're targeting and hoping to be about double-digits with that. So that's really what we're focused on. We think that these are foundational changes that are being made, and we think that the improvement is going to continue on ICS.

Yes, and Mike our progression towards that 10% is something we're going to gradually build during the course of this year. And really establish a new jumping off point with these benefits that we've been talking about as we move into 2014. Michael Halloran - Robert W. Baird & Co. Incorporated, Research Division: I appreciate that color. And then on the pump side of the business. Obviously, very nice order progression in the quarter and certainly, it seems like it's ahead of, what I would call, the trends that others in the industry are putting out there. So 2 questions related to that. One, what do you see from an underlying order trajectory? What are the customers saying right now? Are you still seeing delays at this point, or some of those orders starting to get pushed out? And that's excluding the mining side, where, obviously, things are challenging? And then second, the orders booked at this quarter, what kind of flow-through do you expect? I mean, is this a 2014 when these should be coming out? Or is this something that's going to help the back half of this year?

Let me talk first now. I'll turn it over to Tom to talk about the orders book this quarter. But in terms of what we're seeing with orders, as we've indicated in the past, we've been seeing that there's been some sluggishness in some of the baseline activity that we've had. We've talked about sluggishness on the projects side of the business. Actually, we're beginning to see that free up somewhat. So we're beginning to see some smaller to midsized projects being released in the Middle East. And so we're seeing some of that breaking through. But the quote and the feed activity continues to remain high with that. So we're beginning to see some improvement there. We're still hopeful in the back half of the year that more of these larger projects are going to get released. But we are beginning to see some of the smaller projects getting released.

Yes, Mike, as you think about the order progression, we are starting to see, as Denise mentioned, some of the projects come through. Our waiting in the order book in Q2 is starting to shift more towards projects, and we expect that to kind of continue as these large projects come through. We're seeing the biggest pickups in oil and gas. That's where the larger projects are starting to come through. We've had some good indicators for July and August in that regard. But to your point, a good chunk of these large project orders are really setting up into 2014. We have good visibility into the backlog for 2013 at this point, as it relates to the project deliveries we have scheduled. The challenge, as Denise mentioned, is really this baseline business, and that's where the order flow's a little bit more booked and shipped. So it's a little bit harder to see the trend line in that business. And if you just back away a little bit further, from the chemical market perspective, I would say, the projects have been slower to come on board this year. And I think, interestingly, from a mining perspective, we have started to see some of the projects pick up a little bit as the years progress. So while the sales have been down, the orders in mining are starting to pick up a little bit, and that's kind of the -- a typical pattern that we'll see at this point in the cycle. Michael Halloran - Robert W. Baird & Co. Incorporated, Research Division: Makes sense. And then last one for me, just mentioned on the North America auto break side that there was some shipment timing. I'm guessing that's delays. Are these delays that go from front half to back half of the year? Or is it something that's pushed into next year?

We see that in the first half, when you look at North America and you look at automotive, we were actually up 18%. So there really was a shift that occurred between the first quarter and the second quarter. As we go into the back half of the year, we expect to see that moderate a little bit from the 18% growth rates, but still on a year-over-year basis, we're expected to be double-digit in North America. And remember, our strategy has been to diversify away from our European base and to expand more North America and in China, which is why you're seeing some of these nice growth rates in North America and China with again, 18% in the first half of North America and the China business actually growing 84% in the first half of the year. So we're happy with the progress that we're making from a strategic perspective.

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

Tom, I'm going to have to push you a little bit just on the guidance for the second half of the year. If I just do the kind of conversion rates, what you're implying with the $0.90 at the midpoint of cumulative second half earnings versus last year and what we are basically implying on the revenue side. Any kind of back out what the strategic investment is in the second half of the year, which I assume, is incremental on a H2 '13 versus '12 basis? I mean the underlying conversion rate is maybe double digits. It just seems extraordinarily low. Is that an issue of conservatism? Or are there other things that play here that we should be thinking about.

Brian, when we think about the second half, we are still looking at pretty solid 13% year-over-year EPS growth compared to the prior year. So there is always the seasonality that, I think, is kind of implicit in our portfolio where the Motion Technologies' Q1 profitability is at its highest point in the year because of the strength that they have in the aftermarket channels in Q1. So there will always be a first half and second half dynamic that's driven by Motion Technologies. What we're looking at in the second half of the year, we certainly had a discrete shift from Q3 into Q2, and let me just talk about that for a second. We called it out as a $0.03 movement versus our expectations. And what that was is we applied some additional financial rigor and discipline around some parts orders with Bornemann customers in South America. And our view was we were going to get current with those accounts before we went ahead and shipped any additional parts. The initial expectation was that wouldn't happen until Q3. But based on the efforts of our team, we were able to kind of collect that outstanding balance, get current with that customer and move those shipments into Q2. And that pulled about $0.03 out of Q3 and move that into Q2. So I just want you to be aware of that. But it's good financial discipline and rigor around the Bornemann acquisition and keeping those accounts current. So lastly, I would say, Brian, the 2 other big items in the second half, the baseline business in our pumps Industrial Process segment is the hardest to see at this point. It's been sluggish all year. All the indicators are that it's picking up a little bit, but it's far less than what we expected going into the year. And that is a nicely profitable business line for us. And some of that is really tied to utilization rates and markets like chemical that haven't reached the levels we anticipated. We don't see any indicators of a significant improvement in the back half of this year, so that's one of the other factors to consider. And then lastly, we are increasing our investments in the back half as you saw. And those investments are really triggering off the strength we're seeing in the first half. So the automotive strength in China is something we want to keep investing in and accelerating our commitments behind that growth. And then a higher share of the aftermarket capture and service opportunity in our global pumps business is another area of acceleration in our investments. So those are some of the considerations moving from first half to second half as we reposition the guidance.

Okay, Tom, I understand the first and second half but I guess I'm doing a year-over-year comparison. And just kind of doing the basic math and what were you anticipating with the revenue growth, we could back out what, basically, the cumulative amount of revenue you're going to do in the second half based on the guidance. And just the $0.90 of the second half of the year versus what you did last year in second half, it implies that conversion rate is about 9%, 10%, which is not a typical type of conversion we see with ITT.

Yes, Brian, when I kind of look at the second half year-over-year, we do continue to generate good segment income growth. And probably, the other part of the equation is there is a heavier weighting of corporate activities in the second half of the year versus the first half of the year. So if you look at it from a segment basis, I think you're going to see really strong year-over-year growth rates. We do have additional corporate items that we're expecting to take place in Q3 and Q4 that takes the strong segment growth down to an EPS growth in the second half, which is about anywhere from 12% to 13% higher than the prior year.

I think the other thing to mention is that when you look at the pump business, we're expecting some very strong growth happening in the back half of the year. Based on these projects and how these projects play out over the year, which particularly with Bornemann, tends to be very heavily weighted into the fourth quarter. To the extent that a large project can shift from this year into next year could be an impact that could impact us in this year. So we're cognizant of that. We're aware that a large shipment could switch from this year into next year, and so we think about that when we put our guidance together. As Tom said, in this -- in North America, in this chemical market, that is one of our highest profitable margin businesses for us. And until we see some improvement happening in North America chemical side of things and that even extends into the pump business for the industrial sector of the economy, we're just cautious about what can happen in the back half of the year. We've not seen the positive order growth rates there yet.

Yes. And 1 more follow-up comment there, too, Brian is our project waiting in the second half of the year compared to the first half of the year, because of the slowdown in the base activity we've been seeing and the growth we're seeing on the projects side, which as you know is a lower margin, we're looking at about 5-point shift -- a 5-point increase in our project waiting in the second half compared to the first half. And that's one of the challenges, obviously, of kind of the quarterly visibility in this business. We know that there are movements in projects and aftermarket that can really the shift the margins around. So we try to give it as much visibility into that mix as we can. Right now, there has been a big shift towards project waiting in the second half compared to the first half.

And if I could just follow on just on the Industrial Process side, so you said that more projects are breaking loose in the Middle East. You've made a mention of pricing being a little bit difficult in the quarter. Maybe you could just touch on that a little bit. Are you seeing incremental weakness in pricing? Or does it relate to some of the projects breaking free that I assume you and possibly some of your competitors are trying to fill up volume with? Can you just talk to the pricing trend you saw in the quarter and maybe how you are thinking about that going forward?

Pricing is very competitive in the project pump business right now. So while we see pressure being applied on the pricing side, from our standpoint, we're staying very, very disciplined and that's because the capacity that we have available to us, there are -- we believe there's going to be a lot of projects coming through in the back half of the year and we're going to be able to be selective on those projects and only choose the one that makes most sense for us. In fact, we have a very rigorous process internally where we look at the ROI on these projects and we measure it and we compare it and we think about which ones would breakthrough when and which ones we want to bid on. So we're being very selective with that. But saying that, there is a lot of competition out there right now and it has intensified and we are seeing somewhat of a pressure on pricing. Not as bad as it was couple of years ago. But people are looking for these projects to breakthrough and so there is a little pressure on the pricing.

You're next question is from the line of Matt Summerville with KeyBanc.

A couple of questions. You mentioned kind of pulling forward that auto expansion in China. Can you talk a little bit more about that? How much is that going to cost in terms of CapEx? What kind of capacity increases are you going to get? And how quickly can you bring that online over the next couple of quarters?

When we started our brake pad facility in China in the fourth quarter of last year, the current capacity that we have available to us, we're not quite up there yet, but it's about 5 million brake pads. We've been winning so many platforms in China that, as I said in my prepared remarks, we are 3 years ahead of where we thought we would be when we initially made this investment. So we have our facility already there. What our plan is, is to take the facility, and we did this in a very modular way, but to take the existing facility and put in the equipment that we need in order to ramp up the capacity of that facility. And we are looking at taking that capacity up to about 20 million brake pads because we've won this platform. And when we lay out over the course of the next 3 or 4 years, the type of capacity that we're going to need, we see that 20 million is the amount that we're forecasting at this point in time. And then if more comes, we have that capability and the capacity to also take that existing infrastructure that we have and build it out up further for more capacity. So we're looking to take it from 5 million up to about 20 million and we're going to start doing that this year.

So basically, you're looking at your utilization -- or your production going from 5 million to 20 million over another 3 to 4-year period, even though you already sold out 5 million in less than a year?

We see it going up to that level in about the next couple of years or so.

Yes, Matt. It is also tied to kind of a global rebalancing that we're doing with our production capabilities. So we have a strong manufacturing capability in Europe, including Italy and the Czech Republic, and then now, China. So we're really balancing our production across those locations in addition to taking on new platforms. But I think having this expanded capacity is going to allow the team to kind of manage the utilization much more effectively on a global basis because we're not only serving China and Europe, but we also have this growth in North America that we're continuing to pursue.

This has been one of the nice benefits of the Lean initiative that we've had underway where we've been able to take our main facility in Barga, Italy and we've been increasing the capacity of that plant through these Lean improvements that we've made. That's allowed us to save on additional capital expenditures that was need to be made there. So as Tom said, we are looking at the facilities we currently have, lean them out, getting as much production as we can out of those facilities, but at the same time, recognizing that this large growth that we're seeing in China and being close to our customers, is important to us, so we need to build out this additional capacity in Wuxi, China.

With respect to Industrial Process, if you think back 1.5 years to when everyone split off here, what would you have quantified your aftermarket capture rate at in IP? Where is it today? And where should it be based on the investments you're making?

The aftermarket today is probably around 35%, something like that. Could be a little bit lower than that. What's been happening in the Industrial Process is we've been building out our oil and gas platform, therefore, we have been going after the projects business. So from a percentage basis, you wouldn't it see much of an increase in the aftermarket because we're so heavily weighted with these new projects. But look at the growth that IP has had over this time frame. So we're growing the aftermarket, but we're also growing the projects side of the business. And so we're capturing that aftermarket as we're growing the projects side of the business. Now we're putting some initiatives in place to continue to grow this aftermarket, focused particularly on the service side of things. So some of the investments that we're talking about making in the back half of the year are going to be related to this aftermarket and capturing this aftermarket as we go out into the future. But to the extent that we continue to win project business, which is what we're doing with these double-digit growth rates that we've seen, it's hard to get the aftermarket on a percentage basis to catch up with that. But on a dollar basis, we're capturing that aftermarket.

I got you.

And just 2 quick follow-up points there, Matt. Bornemann, which has a lower aftermarket content than our base IP business, is an area of opportunity, so we want to grow our aftermarket content within Bornemann. And we have been seeing, as of late, some of the parts activity start to flow through from this project increase. And that's something we're seeing on a global basis, an increase in aftermarket volumes in the Middle East and elsewhere based on where we've been installing projects recently. So that's been something that we've been anticipating. It is growing and gaining momentum. But to Denise's point, the growth in the projects has been so pronounced that you're not seeing that kind of flow-through in the aggregate waiting.

I think we've indicated in the past also that we just recently hired a new leader for aftermarket for IP. So we very much have a focus on this aftermarket business and capturing most of it, because we think we're entitled to be able to do that. We're going to build these service centers, we're going to build out some of our capabilities and our people and aggressively go after it.

And then with respect to Bornemann, how would you characterize their incoming order activity in Q2? And what does their backlog look like? What kind of revenue number does that support for this year?

Yes, Matt, the Bornemann activity is strong on all fronts. I'd say they're kind of running favorable both on an order and a revenue basis at this point. Their backlog from Q1 is about -- is a little bit ahead of where we were, but we feel pretty good to deliver the revenue commitment we have for Bornemann this year. The challenge is -- it's not one of orders, because we're continuing to grow the Bornemann order book. The challenge is just the amount of activity that could shift in Q4. So they have a lot of big projects that are lined up for shipment in Q4. They have good order visibility through this year, and what we're projecting at the end of next year is going to also put them in a situation where we would expect their backlog to actually end above where it began this year.

In terms of Bornemann and how we feel about it as an acquisition, we feel very good about the acquisition that we've made. The integration is going extremely well. We are beginning to see the synergies that we talked about when we acquired Bornemann in terms of sharing some facilities now, and we're also seeing some nice opportunities from a cross-selling perspective where the Goulds Pumps folks have been able to sell multi-phase pumps. And then it's worked in the other direction also where Bornemann folks are also looking at selling the Goulds brand. So our strategy around building out this portfolio and getting into more products and getting into new technologies is really -- we're really beginning to see the benefits of that and it's just going to continue to build over time.

Where would you anticipate Bornemann's margins exiting? Or I guess where is Bornemann's profitability now, if you exclude the purchase accounting adjustments? So on an adjusted basis. And where does that maybe get to in 6 to 12 months?

Yes, if you exclude kind of -- not all the purchase accounting -- we look at some of the step up to year 1 quick turn amortization, but kind of their ongoing run rate with the intangible amortization baked in. They're trending that towards kind of the high-single digits this year. And as we talked about, it's going to take us time to really start to capture that aftermarket profitability and that's where you'd start to see a torque up in their margins from where they're currently positioned. But I think we're on track to really start to drive this business towards a margin profile that first gets in the high-single digits and then starts to move beyond that. But the key lever is that aftermarket and it will take time to build up that capture rate, which is why these investments that we're making and accelerating this year, not only benefit the Industrial Process portfolio at large, but it also gives us the ability to accelerate the capture of that very profitable Bornemann aftermarket.

[Operator Instructions] Your next question comes from the line of Jim Krapfel, Morningstar.

You've done extremely well taking share in Motion Technologies. What has really been the -- how have you been able to differentiate yourselves with your brake pads to take the market share?

Well, we are known as the leader in brake pads for the automotive sector. This really dates back over 20 years. And we have gotten the recipe correct in terms of integrating the capability that we have with innovation with our R&D department, knowing how material science works and how to mix compounds together to make a brake pad that makes sense for the different road conditions and the different geographical locations. And then from a manufacturing standpoint, we're very automated, and we do -- we have a very efficient and effective manufacturing process that we employ. It's really pulling all of those 3 things together and having it work in tandem that allows us to be able to have the type of market share that we do and to be able to extend that to other geographical regions besides Europe.

How long a runway do you think you have to take on more share?

In Europe, we've been -- we're probably at about 40% to 50% market share, so it gets a little bit tougher as we continue to gain share there. But we've got a lot of runway in North America and in China because those are 2 areas that we've just started penetrating. We've got a nice position with Ford in North America, but we're looking to increase our presence with GM and Chrysler. And then in China, we just begun, as we've indicated, with our Wuxi facility and the fact that we're already expanding that facility.

What would you estimate your market share is in the North America?

It could vary customer-specific for us. We're primarily with Ford in North America at this point, and we're one of their top suppliers. So we're not fully participating in the market. So our share is very low at this point in North America, but the opportunity is, as Denise mentioned, is to really go after opportunities with GM and Chrysler over the next couple of years.

And then second question, what's the M&A environment looking like for you? Are valuations a constraining factor in your willingness to execute it in deals?

Well, M&A is something that we've been focused on as a company. In terms of the pipeline, we're in early stages of cultivating a number of different opportunities. We look at acquisitions that are close to the core. And so we're focused in acquisitions that would help the oil and gas space, which is what we do with Bornemann, could be an energy absorption, aerospace, avenues like that. We tend to look at $15 million to $50 million, but due to the success of the Bornemann acquisition, if something came along that was a little bit larger than that, we would entertain that opportunity also. So it's something that we recognize is going to be a good use of our capital out into the future. We're just -- we're working the pipeline and you never know when something can happen and the action ability associated with it. But we are in early stages of cultivating a number of different opportunities.

Our final question comes from the line of John Inch with Deutsche Bank.

So how did Bornemann actually do in the quarter? And part of my question in the angle there is, I think Canada is about 15% and there's pretty big oil and gas disruption in Canada because of floods in Alberta. So I'm just curious what was Bornemann's top line. Did it see any kind of disruption associated with that?

No, we really didn't see anything there, John. We actually had revenue growth ahead of budget in Q2 for Bornemann. So nothing has really come through and impacted either their order book or their revenue on a year-to-date basis. But it's certainly an area that we would continue to watch but it has not impacted our results at this point. So they are tracking ahead on a revenue basis. We talked about some of those parts shipment moving in from Q3 into Q2, but we're also pleased with the income delivery that they had in the quarter. But at this point, we're not seeing anything specific in Canada that's causing us any delays or concerns.

You just noted Bornemann's growth rate, Tom. I recognize there is an adjustment third quarter to second quarter. I mean, what kind of a growth rate is Bornemann realizing now? Is it close to 20%?

For the full year revenue, Bornemann, we have to kind of go on a pro forma basis and that's one of the challenges. But we are certainly seeing a revenue potential this year compared to last year on a pro forma basis that would be in the double-digit, John. So we can look at a 10% to 15% top line growth at Bornemann based on where they finished up the full year last year. And what we're seeing in the backlog and the orders, that they are continuing to grow at a rate probably faster than we anticipated. So the demand has been good. They do have this disruptive technology that is continuing to gain acceptance, and I think combining Bornemann with the strength in the Industrial Process franchises, Goulds Pumps in particular, is really continuing to give further credibility to an already well-established and well-known brand. So we feel good about what we're seeing on the top line and running through the orders, primarily being driven by global oil and gases as the workhorse.

That makes sense. And just to clarify, Tom, you had made commentary about sort of project with respect to Industrial Process picking up in the second half. I mean, I guess I see why that maybe affects your realized margin, but I don't see what that necessarily has to do with your earnings per share. It should all be additive, should it not? If your IP project business is expecting to be a little bit better in the second half regardless of your margin, why doesn't that actually help your EPS?

Yes, it would, John, absolutely to your point. I think what's not flowing through is just the way corporate impacts first half versus second half comparisons, so there would be some incremental income for sure. But if you look on the year-over-year basis, in the back half of the year, we do have additional corporate that's diluting down some of the income growth that we're seeing at Industrial Process. But this mix shift, the differential between a project revenue and baseline or aftermarket revenue is fairly pronounced. So you will not see the level of income growth when you're growing on the projects side of the business, that you would if you were growing the top line with a heavier weighting of aftermarket and baseline.

But it sets itself up for future aftermarkets. I want to ask -- I just want go back to this Wuxi facility because some of these numbers are a little bit, well I guess, sort of hard to kind of grasp kind of what's going on here. The Wuxi just came online and you had set a capacity of 5 million pads. Now you've gone back after you've already built this thing and you're expanding it to 20 million pads. I think it's a great problem to have, but it seems to be a pretty big mess in terms of what you think you could have been doing in the market. Am I missing something like why not go back in 2 years and say, well now, we have to extend it to 50 million pads. Like I'm just trying to understand kind of what's really happened. And I recognize Denise, I think you made comments that your sort of -- or Tom, your balancing margin with Wuxi with you putting a little bit more production there. It just seems a little bit -- just the numbers don't quite seem to make a lot of sense concerning this plant literally just came online?

No, John, let me just make a statement that when we made the decision to invest in China, we knew that we had a lot to learn. We did not -- this business has been, historically, a European business, and we knew that operating in China was going to be different than what the team was used to operating in Europe. So we had a lot to learn. We had a lot to learn in terms of getting the right people on board, the supply chain, even though we were taking the existing process and migrating it from how we operate in Europe to how we operate in China, we were doing that. But we knew that we had a lot to learn and we didn't know, really, how that all would work out, we'll be able to operate efficiently and effectively, and that could impact our customers. So we were cautious with that. And we decided that we wanted to do this in a very modular way. We wanted to ramp it up more with the market over time, and we knew we could do that when we went into it. So we developed a footprint that allowed us to have room to grow in time. And we're just very fortunate with the processes and the business that we have there that we're able to continue to gain this share. And we're able to show how we can operate and produce brake pads that have the good quality that we're used to having out of Europe. So you may say it was conservative in doing that. We thought it was the right approach. We think it's the right approach to do it that way. Because when you're going into a new area, you never know how it's going to impact you.

So I guess it never hurts you to have demands 4x which you thought a few months ago. My last question, I guess really, is around, Denise, your thoughts toward further penetration in North America. Do you expect maybe a GM or perhaps other unnamed OE to make an announcement sometime this year? I think you were a little more -- you were sort of optimistic that this could be a situation perhaps earlier in the year. I'm just wondering what your thoughts are today.

Right, right. We've been working with both GM and Chrysler associated with that. And we are on GM's supplier list for new platforms, and so we're happy about that. So based on that, it would be nice to see some volumes coming through with GM in the near to medium future. With Chrysler, they have a different process. We're working with them, and we'll just keep working with them to try to get some volumes out into the future. Let me just close out by thanking everyone for joining us on the call today. As you have heard this morning, we are very pleased with our first half performance and how we've really been able to propel our strategy forward. This, really, is the result of focus and strong execution from our 9,000 employees. And we're going to continue to create ongoing long-term value for all of our stakeholders. I look forward to updating you on our progress next quarter. And until then, thank you very much.

Thank you. This does conclude today's conference call. Please disconnect your lines at this time, and have a wonderful day.