Welcome, and thank you, all, for holding. [Operator Instructions]. Also, this call is being recorded. If you have any objections, please disconnect at this time. I will now turn the call over to Ms. Martie Zakas. Ma'am, you may begin.

Very good. Thank you, and good morning, everyone. Welcome to Mueller Water Products 2013 Fourth Quarter Conference Call. We issued our press release reporting results of operations for the quarter and year ended September 30, 2013, yesterday afternoon. A copy of it is available on our website, muellerwaterproducts.com. Mueller Water Products had 158.2 million shares outstanding in September 30, 2013. Discussing the fourth quarter's results this morning are Greg Hyland, our Chairman, President and CEO; and Evan Hart, our CFO. This morning's call is being recorded and webcast live on the Internet. We have also posted slides on our website to help illustrate the quarter's results, as well as to address forward-looking statements and our non-GAAP disclosure requirements. At this time, please refer to Slide 2. This slide identifies certain non-GAAP financial measures referenced in our press release, on our slides and on this call, and discloses the reasons why we believe that these measures provide useful information to investors. Reconciliations between non-GAAP and GAAP financial measures are included in the supplemental information within our press release and on our website. Slide 3 addresses our forward-looking statements made on this call. This slide includes cautionary information identifying important factors that could cause actual results to differ materially from those included in forward-looking statements, as well as specific examples of forward-looking statements. Please review Slides 2 and 3 in their entirety. During this call, all references to a specific year or quarter refer to our fiscal year, which ends on September 30, unless specified otherwise. All operating results discussed in these prepared remarks are from continuing operations unless specified otherwise. A replay of this morning's call will be available for 30 days after the call at 1 (866) 470-7045. The archived webcast and the corresponding slides will be available for at least 90 days in the Investor Relations section of our website. In addition, we will furnish a copy of our prepared remarks on Form 8-K later this morning. After the prepared remarks, we will open the call to questions. I'll now turn the call over to Greg.

Thanks, Martie, and thank you for joining us today as we discuss our results for the 2013 fourth quarter and full year. I'll begin with a brief overview of the quarter, followed by Evan's detailed financial report, which covers key drivers affecting our businesses. I will then provide additional comments on the quarter's results and developments in our end markets, as well as our outlook for the first quarter and for full year 2014. We are pleased with our overall fourth quarter results, particularly the 47% year-over-year increase in adjusted operating income and the 27% improvement in adjusted EBITDA. Mueller Co. continues to benefit from improved operating leverage and the ongoing recovery of its end markets, especially residential construction in certain regions of the country. Mueller Co. continued to see growth in domestic shipments of valve, hydrants and brass products during the fourth quarter, and this strong mix contributed to the segment's 40% year-over-year increase in adjusted operating income and the 430 basis points improvement in adjusted operating margin to 15.8%. Domestic dollar shipments of valves, hydrants and brass products increased 13.7% during the quarter year-over-year. Anvil had a strong quarter, with net sales up 8.8% and adjusted operating income up 30% year-over-year. 2013 was a year of strong performance for Mueller Water Products as evidenced by year-over-year net sales growth of 9.5% and adjusted operating income growth of 48%; free cash flow generation of $78.5 million, an increase of $33.1 million; and a reduction of net debt leverage to 3x. Our 2013 performance reflects the ongoing operating improvements we have made over recent years, as well as the benefits we have realized from improving end markets. I'll now turn the call over to Evan.

Thanks, Greg, and good morning, everyone. I'll first review our fourth quarter consolidated financial results, and then discuss segment performance. Net sales for the 2013 fourth quarter of $293.2 million increased $12.1 million, or 4.3%, from the 2012 fourth quarter net sales of $281.1 million due primarily to higher shipment volumes and higher prices. Gross profit improved 15.9% to $88.8 million for the 2013 fourth quarter compared to $76.6 million for the 2012 fourth quarter. Gross profit margin of 30.3% improved 300 basis points from 27.3%, representing our best performance since the fourth quarter of 2008. This improvement was driven primarily by higher shipment volumes and higher sales prices. Selling, general and administrative expenses as a percent of net sales declined to 18.9% for the 2013 fourth quarter from 19.2% for the 2012 fourth quarter. Selling, general and administrative expenses were $55.4 million for the 2013 fourth quarter compared to $53.9 million for the 2012 fourth quarter. Adjusted operating income for the 2013 fourth quarter increased 48.7% to $33.4 million from adjusted operating income of $22.7 million for the 2012 fourth quarter. This increase was driven primarily by higher shipment volumes and higher sales prices. Adjusted EBITDA for the 2013 fourth quarter increased to $48.2 million from $38.1 million for the 2012 fourth quarter. 2013 adjusted EBITDA was $158 million, an improvement of $30.5 million, or 24%, from a year ago. Interest expense net for the 2013 fourth quarter declined $400,000 to $12.7 million from $13.1 million for the 2012 fourth quarter, excluding $700,000 of noncash costs for terminated interest rate swap contracts for the 2012 fourth quarter. This decrease was due to lower levels of total debt outstanding. For 2013, interest expense declined $3.2 million, excluding terminated interest rate swap contracts of $5 million in 2012. During the 2013…

Thanks, Evan. I'll now elaborate on our 2013 fourth quarter and full year performance in end markets and provide an outlook for the first quarter and full year 2014. I'll begin with Mueller Co. We continue to see strong growth in domestic demand for our valves, hydrants and brass products. As I mentioned earlier, domestic dollar shipments for these products during the fourth quarter grew 13.7% year-over-year. We believe this increase was driven primarily by residential construction growth, although we also saw some positive activity in municipal spending. Year-over-year sales of metering products declined in the fourth quarter, although going into the quarter, we had expected sales to increase modestly. First, orders from our largest meter customer declined year-over-year, which we believe was due to scheduling; second, sales were lower than expected due to the timing of a major order. During the quarter, we received an order from Jackson, Mississippi for 65,000 units, the substantial majority of which was for our Remote Disconnect Meter and for our 2-way AMI system. This was the largest single order that Mueller Systems had received. We originally expected to receive this order earlier, such that we could start shipping during the fourth quarter. Instead, given the timing of the order, we expect these units to begin shipping later, during our first quarter of 2014, and to continue throughout calendar 2014. Sales to Canada were down year-over-year, as we saw a fall off in demand due to a market that remains soft. We were also negatively impacted by a weaker Canadian dollar. While Mueller Co. net sales during the quarter grew only 2% year-over-year, demand from our core domestic markets remained strong. Anvil also had a very good quarter. They saw a nice pickup in activity for their products, with net sales growing just under…

[Operator Instructions] Our first question comes from Kevin Maczka. Kevin R. Maczka - BB&T Capital Markets, Research Division: BB&T Capital Markets. First, Greg, on the Mueller Systems, I think I missed the last part of your comment there. Your expectation for '14, you're not going to see the same 50%-type growth again in '14, but with the projects that -- and the wins that you've recently had, are you still expecting that to be flat? Or are you still expecting double-digit growth there? I missed that part of your comment.

No, Kevin, we would still expect double-digit growth. In fact, I know in our investor presentation, we believe -- we say over the next couple of years we would expect to see a 20% year-over-year growth. So we're still comfortable in seeing at least a 20% year-over-year growth. What we expect to happen in this business over time is that we are selling fewer and fewer mechanical meters, more meters with AMI -- with the AMI, either 1-way or 2-way systems. So yes, we still expect to see year-over-year growth, and we're comfortable with saying that we would expect to see at least 20% year-over-year growth. But we will have a much more favorable mix due to the -- we're selling more of our technology products. Kevin R. Maczka - BB&T Capital Markets, Research Division: Got it. And do you have that comfort in the 20% this year and '14 because of the recent wins that you've already got in your pocket? Or is it that plus the bidding is still quite active and you feel pretty good about further wins?

I'd say it's certainly a combination of both. The recent wins certainly helps our backlog and as we said, most of those are scheduled to ship in 2014. But I would say right now that we have still a pretty good funnel of quotations outstanding or projects that we would expect to quote in 2014 that we would hope to turn to orders and shipments. So it's a combination of both, but I think with the activity in our wins for the last couple of months, it certainly solidifies our confidence of being able to deliver that 20%-plus growth year-over-year. Kevin R. Maczka - BB&T Capital Markets, Research Division: Got it. And can I just ask a question on Mueller Co. margins, which are very strong in the quarter? It looks like the total segment revenue was up $4 million, but profit was up $9 million. And if I back out Mueller systems, it seems like the incremental there was about 50%. Now I know you've got some products that you say can do 50%, things like valves and hydrants, but that's not the normal mix or the normal trajectory for the whole segment. Can you just talk about that? What other -- maybe beyond pricing and volume that we know about, were there other productivity initiatives that really drove that better than we might have thought?

Yes, we -- and you hit -- the biggest -- the primary contributing factor was the rich mix we had. Certainly, our valves, hydrants and brass products -- so we're seeing nice conversion on brass products as we move to no-lead brass that actually has been a boost to our margins, if you look at where those margins were historically. And those products, our shipments grew about 40%. And when we look at our valves and hydrants, given the capacity utilization, some of our efficiency improvements, conversion margins for fourth quarter for our valves and hydrants were just almost 60%. So, again, we had very good performance of our plants and a very rich mix. We also benefited a little more, too, from -- you've heard us mention our focus on lean initiatives the last few years and that we get many benefits on the cost side, working capital management and -- but also, one of the benefits is that we are making our processes safer. And I think a good example of that is the VPP Star that I mentioned in our prepared remarks recently awarded to Albertville location. When you look at foundries, foundries are inherently dangerous. But I think as a result of our focus, the last several years, we've seen a significant improvement in our safety results. And we also saw a benefit in the fourth quarter on a very nice reduction in our workers' compensation costs. So I think that the primary driver was the rich mix, the increased capacity utilization, especially in our valve and hydrant product area, but we did see some benefits from other sides. And one of the ones that we specifically saw in the fourth quarter was lower worker -- workmen's compensation costs, and it's all combined to contribute to a very strong conversion margin. Kevin R. Maczka - BB&T Capital Markets, Research Division: Okay. So since you mentioned it, Greg, what was capacity utilization in Mueller Co. in Q4%? And given everything you just said about the improvements made, should we still be thinking about Mueller Co. x Mueller Systems as kind of a 35% incremental margin on volume growth going forward?

Kevin, I think that we are comfortable with having at least -- on the Mueller base of at least 35% conversion margin or possibly a little better. Our capital, our capacity utilization rates for the fourth quarter were about -- for Mueller Co., were about 70%. And actually, since you brought it up, talking about looking at our base business, if you look for our Mueller Co. business in fiscal year 2013, so if we, again, subtract our metering and leak detection business, EBITDA margins for the full year were at 22.5%. So that's -- we've said when we get to $1.1 million, $1.2 million housing starts that we think are base Mueller business, you get back in the 25% range, we're very comfortable, given the capacity utilization we were this year and being able to generate EBITDA margins in that portion of our business at the 22.5%. Now I don't want to be misleading on our conversion margins because that can vary by quarter. For instance, we pointed out in the first quarter, our first quarter is typically our lowest conversion margins because we will have plant shutdowns around the holiday, but when we look -- around the holidays. But when we look on average, I think that we're very comfortable with saying that, that business should be able to achieve at least a minimum of 35% conversion margin.

Our next question comes from Mike Wood.

Macquarie Capital. In your initial 2014 comments, you talked about comparable growth overall in the Mueller Co. base business. So you'd also mentioned strength in residential. I'm curious kind of what you think, at the current 900,000-plus housing starts, the appropriate infrastructure spend from Mueller's standpoint would be on your products next year? And how that compares to where you are now? I mean, basically, it seems like you're implying some growth in residential, but not necessarily that large in acceleration in the resi growth?

Mike, thanks. I will say that we are very positive, and I would say approaching bullish for what we think housing starts will mean for us next year. I will say the one piece of data that we're missing certainly is on housing starts this year, how much new or raw land needed to be developed to support that housing start number. We believe that, certainly, that excess inventory of developed land that existed has been effectively worked through in most regions of the country, so we do believe that future demand for lot development will be somewhat commensurate with the need for housing starts. But I would say that, that is the -- the lack of data, at least for us, we are unable to get that data. So that, I would say, colors a little bit, affects a little bit our expectations for next year because we do think there may be some parts, some regions of the U.S. that may still have excess developed lots. But certainly, as I said, that we are much more bullish. We believe that a lot of that excess developed lot -- a lot of excess developed lots were absorbed this year. And I'd say that maybe our outlook had just a bit of caution until we can get a lot more comfortable as to how much raw developed land needs to be -- or how much raw land needs to be developed to support the housing start increase.

That's fair. And also I'd love your view in terms of the impact from interest rate increases on -- how it impacts the water utility customers that you serve from a municipality standpoint to project ROEs, or how demand could fluctuate based on interest rates sensitivities?

Yes, I think that -- we certainly think that some projects could be impacted by the higher rates that they would have to pay in the bond market. Though, again, I think on a micro level basis, our discussion with our customers and with our distributors indicates that they certainly support our expectation that we will see continued growth in municipal spending on repair and replacement. We referenced, of course, the continued increase in water rates and that's a major source of funding for water utility. But the growth could be somewhat muted if we see the continued growth in interest rates because there's no question that there are projects that are financed by our utilities going to the bond market.

Great. And finally, can you just give is the -- for the quarter, the Mueller Systems and Echologics sales number or drag on margin so we can figure out what the base business contributed?

Yes, if you look at the -- we think that the overall drag on margins for Mueller Co. were about 400 basis points.

Next we have Michael Gaugler.

Brean Capital. A lot of my questions have already been answered, but one I wanted to ask, and I hope it's not too early to ask this question, but I'm wondering what you're thinking, Greg, on raw material costs and, more specifically, price increases for next year?

Yes. Mike, we look at raw material costs. We think that they fairly have been stable. And when we look all in all, we think in 2014, we may be able to see a little bit of a decrease in our overall material costs. That being said, we continue to see increases in other areas. We certainly see an increase in freight, continues to -- freight continues to increase, our medical costs continue to increase, and so on. So you're right. It's a little premature for us to make a decision or be able to announce exactly what we're going to do with pricing, but we take all those factors into account, and we'll probably be making a decision sometime here in the next couple of months and -- as to what we think we need to do with pricing. But I'd say that we think raw materials will be less, but we do expect to see other costs increasing.

Next we have Seth Weber.

It's RBC. I guess, first, I just want to clarify that I heard something correctly. Are you saying that the growth rate for the overall Mueller Co. in 2014 -- fiscal '14 will be similar to the growth rate for Mueller Co. in 2013? Was that correct?

Yes. Seth, I think we said that the overall growth rate will be the same, though the different segments of the business will grow a little differently. We said that we don't expect to see the same kind of growth rate that we saw in Mueller Systems and that we expect the Mueller base business to grow greater than it what it did in '13. But it all sums up to we think about the growth rates that are similar.

So something in the overall like a low-double digit growth rate. Is that the right way to think about it?

We said the high single-digit -- so in approaching, I think, that the high-single digit maybe low double-digit in total.

Okay, great. I wanted to focus on the free cash flow, very strong generation in the quarter and the year. And now you're talking about 2014 actually being better than 2013. Can you give us some color what you're planning to do for the free cash flow, what kind of opportunities you see out there, and if -- whether it's organic growth or acquisitions or doing something with the capital structure? Any hints there?

Yes, thanks, Seth. And I know we've had the opportunity to discuss this at a number of our investor conferences. I think we've discussed it in previous calls that we when we look at our excess cash, our flexibility is somewhat limited. When we look in terms of debt retirement, share repurchase or dividends, because as long as our 8 3/4% notes are outstanding, we are limited by those indentures. And just to remind everyone, they're not callable at a predetermined price until September of 2015. You look -- we do have a restricted payments basket of about $65 million, which can be used to repurchase the 7 3/8% notes, we can use some of that for share repurchases or dividend payments. But obviously, other potential uses of free cash flows could include acquisitions. So right now, there's not a specific -- so I can say here, for the next 12 months, here's specifically where our excess cash or the cash we're generating will go. But our board does continually monitor our cash position and evaluate the capital structure, and we are looking at -- we've always said that if we get our debt leverage down to 3x or below 3x, then we would be -- I think have our eyes a little more open to look at potential acquisitions. So clearly, I think that, given where our debt leverage is, the cash that we have, it does give us some opportunities. So in some areas that I just mentioned, we are -- our flexibility is somewhat limited.

Okay. I mean, it's a nice change of pace relative to where you've come from. The -- just going back to the systems and Echologics business. Do you feel like that you are fully staffed? I know you've made some investments there to bring up sales staff and whatnot. But do you feel like with this additional revenues coming in, that you really should start to see the profitability in that business? I know you talked about sort of second half weighted, but are there incremental expenses that you think could delay that? Or do you feel like you're at where you need to be at this point for that business?

I think from a resources -- from a resource standpoint, I think we're staffed adequately. In fact, it probably hit us a little bit this quarter because of the -- we had resources more than what we needed, but in the anticipation of these orders coming in. I would say that, yes, we should start seeing a much nicer conversion because of the higher volume and also the richer mix because it's more heavily weighted to the -- our AMI technology. We are moving away from the mechanical meters. If I were to say any area of where we may still have some additional incremental spending, it could be in R&D. As we mentioned several times that in -- earlier this year, we've introduced fixed and leak-detection for both transmission and distribution pipelines. We think that this technology has a great future. But obviously, whenever -- in a pilot situation, we may learn some things about the technology that needs some tweaking and may need some continued research and development. So we may have some expenses there, but I think all in all, relative from staffing in our plants from our sales organization and the rest of our resources needed to support the level of activity, I think we're pretty much where we need to be, and we don't see the need to add a lot of cost.

Jerry Revich.

It's Goldman Sachs. I'm wondering if you could talk about the extent of raw material tailwinds you saw in Mueller Co. and Anvil in the quarter? And also just calibrate us on your realized pricing that you delivered in the quarter at Mueller Co.

Yes. Jerry, I would say when we look at raw materials on a consolidated basis between the 2 businesses, we had a little bit of help, but not a significant amount. We may have, on a year-over-year basis, certainly less than -- maybe 20, 30 basis points, so not a lot. We did have a more of -- I'd say, you might call it, a tailwind from pricing. We saw, both in Mueller and Anvil, we had higher year-over-year pricing.

And, Jerry, for Mueller Co. in particular, pricing accounted for about 125 basis points, or 35% of the margin improvement. And just as a reminder, we announced that last price increase on valves and hydrants back in January of 2013.

Okay, perfect. And, Greg, you mentioned that there are going to be some costs that are inflationary for you in 2014 to 2013. Can you just flesh that out a bit more? I guess most of us are of the impression that the raw material part of the cost structure is really much more significant. I'm wondering if you can just flesh that out for us, and the magnitude of cost increases from other areas we should be thinking about?

Yes. As we've said, you look at raw material cost and purchase components as a percent of cost of goods sold, that's, in general, around the 50% mark of cost. And so that's certainly the most significant component. When we look at other cost increases, as Greg mentioned, freight, we look at medical cost and other costs to go up, some of those will be offset by the cost savings programs that we have, our LEAN initiatives and those activities. Though, on a net basis, some of the cost savings will neutralize those increased costs. But we look at the entire cost structure for both Mueller Co. and Anvil, 50% raw material versus components and, as we said before, about 15% labor and the rest, depreciation, amortization and other costs.

Okay. Just broadly, you spoke about your expectations for the way residential plays out and flows through your business. Can you just talk about what nonres project bid activity is like, and broader inquiry levels just for the nonres portion of your business?

Sure, Jerry. As we've said, we saw an increase in activity -- a slight increase in activity in the fourth quarter. We expect that to continue in 2014. I think that when we look at overall -- as we said, overall Anvil revenues up maybe in the mid-single digits on a percentage basis, I think that, that may be reflective of what we see in nonres construction spending. Certainly, we reference the ABI index being above 50 over 11 of the last 12 months. That would certainly imply that as those architects' plans go into development that we should start seeing an uptick in 2014. So I think that we feel comfortable right now, expecting a modest increase in nonres construction spending. And I think the recent activity that we have seen supports that view.

Brent Thielman. Brent Thielman - D.A. Davidson & Co., Research Division: D.A. Davidson. I just have a few follow-up questions. Greg, how much of a headwind was Canada this quarter? And are you seeing any inflection there? Or does that persist based on our expectations for 2014?

Yes. If you look at -- Brent, our revenues, our sales were down somewhere between $3 million to $4 million on a year-over-year basis to Canada. A little bit of that was FX. But I think we're seeing the market has been soft for the last couple of quarters there. We've seen a drop-off in residential construction. And I would just say municipal spending has been pretty spotty, so when we look at 2014, I think we may -- we believe we may see a little more activity in 2014, so we think that may be more weighted to the second half of our fiscal year of '14. But all in all, I think that Canada just seems to be bumping along for us. Brent Thielman - D.A. Davidson & Co., Research Division: Okay. And then on the tech division, you mentioned some of the recent orders. Could you comment on the backlog and where it sits today versus a year ago?

Yes. If you look at our backlog, our backlog is up probably around $15 million -- where we stand -- where we are here today, about $15 million higher than what we were a year ago. Brent Thielman - D.A. Davidson & Co., Research Division: Got it. Okay. And then are you seeing any changes in timeline from quotation to utilities to the order actually being awarded with the net division?

We are. We are seeing it being pushed out because I think utilities are thinking more and more about AMI. And I think that AMI is -- the consideration of AMI and their analysis of the business case for AMI is taking much, much longer. In fact, the order of that -- if you go back to 2013, what we kept saying that our belief, based on our current outlook, that Mueller Systems would be profitable by the end of the year. We expect that this order that we announced for Jackson, Mississippi, that we just received in September, we were probably expecting -- we were expecting to receive that 4, 5 months ago. So I think that, that's indicative of -- maybe a little bit of the complexity around AMI in the business case. And we are seeing it taking longer. And it's impacting a little bit our ability to forecast because we expected an order to be placed at a certain time, and we're seeing 3, 4 months -- being extended by 3 or 4 months to make that decision. Brent Thielman - D.A. Davidson & Co., Research Division: Okay. And then you mentioned capacity utilization at Mueller Co. for -- at 70%. Did you provide for Anvil?

Anvil is still running probably around 65%. Brent Thielman - D.A. Davidson & Co., Research Division: And any benefits to the margins from mix there? Or is it really just the volume growth?

I would say it was more volume growth and then we did have -- we did benefit some from higher pricing.

Philip Volpicelli -- excuse me, Walt Liptak.

Global Hunter. Most of my questions have been already been asked, but I wondered -- I've got 2 of them. One, maybe I'll go with the quickest one first. For 2014, I think you said corporate expense was at $32 million to $34 million?

Yes.

And this year you did $34 million. I wonder if you could just talk about why it's looking like a reduction and what the bonus comp metric might look like for 2014?

Sure. I'll ask Evan to address that.

When you look at corporate expenses on a year-over-year basis for fiscal '13 compared to fiscal '12, they were just a bit higher there, and that was primarily related to stock compensation, mostly related to the increase in our stock price. And then when we look at 2014, we're always continually evaluating corporate expense and managing those. And so we're providing that general range of $32 million to $34 million. So I think, overall, '14 compared to '13, they'll be similar, in the same range, but there could be some efficiencies that we gain during the year.

Okay, good. And on the conversion margin, I wonder if you could just -- the margin conversions have been impressive, and I just want to make sure that I caught all the numbers that you're talking about for overall and for the 2 segments?

Yes, Walt. Yes, when you look at our conversion margins, as I was mentioning a little earlier, if you look at our Mueller business this quarter, we were approaching about 60% for valves and hydrants and had a very rich valve and hydrant mix. And generally, when you start getting probably into fourth quarter, we would expect to see those -- this quarter -- to be our highest conversion margin because we're getting the benefit of increased production in the third quarter in overhead absorption, and some of that may roll into the fourth quarter. But the increased production in the fourth quarter that we really have a strong -- as I said, strong overhead absorption that reduces our overhead cost per unit and with the mix. So we were at about 60% conversion margins on valves and hydrants, overall, Mueller. And then if we look at Anvil, Anvil had a nice increase on pricing on a year-over-year basis, had a nice volume mix. So conversion margins there were...

Yes, conversion margins in Anvil were right around roughly 35%. But what we said on a long-term basis that the Anvil conversion margins would in the 25% neighborhood and then overall for Mueller Company around 35%. But as Greg mentioned, our valves and hydrants, in particular, could be in the 50% plus range.

Okay, good. And with that said, is there a -- do the numbers work at some point, with revenue going higher and leveraging facility costs and all the other manufacturing costs, that you get better leverage than that 35%, I guess, as capacity utilization goes up?

Yes, I would -- Walt, I would think it will come in steps because at some point, we're not quite as efficient, for instance, when you need to add an additional shift. So we're seeing volume going up, but when you add that additional shift, there may not be enough work to keep that shift fully utilized. So you get some inefficiencies there. But all in all, we would think that as our capacity utilization goes up, our overhead cost per unit should come down and should obviously drop to the bottom line.

Philip Volpicelli.

It's Philip Volpicelli from Deutsche Bank. My question is in regards to the restricted payments basket. I think for several quarters now you've mentioned $65 million. But I believe that there's a 50% net income builder. I'm wondering if the reason you keep mentioning $65 million is because of the net losses you incurred the downturn, you're still trying to offset those of the net income. Or at what point is that flipped to being a positive contributor to that restricted payments basket?

That's correct. The general basket is $65 million. And through the downturn, you're correct, that the losses did build up, and so we're in a negative position on the adder basket. But over time, as we generate positive net income and we move out, depending upon those projections, then that will be an additional add to the basket.

Are you close to that flip point? Or are you still far away from that?

I would say that there is still a ways to go when you look at the overall complexion of the basket.

Great. And in the second quarter, you mentioned that residential construction was about 5% of the total revenue. And at peak, it was 30% to 35%. Where are we now?

When we look at residential construction, it's primarily in our Mueller Co. business. So we were running -- we look at fiscal year 2012, when we were coming into '13, we were running probably a little south of the 10%. And today at Mueller Co., we're a little -- probably little north of the 10%. So I think it's a little more accurate as we talk about it here, looking at it in terms of Mueller Co. And we round these numbers off, so we don't imply a lever -- a level of precision we don't have. We're taking the best information that we have from our distributors and where it's going. But if you look at fiscal year 2012, probably we were a little bit under 5% for if you look at total Mueller Water Products. And today, I would say, we're somewhere between 5% and 10% in total.

Great. And the last one for me. There have been some articles about leak detection in oil and gas pipelines. Is that something that you guys can address with your technology products?

Not as we stand -- not as it stands today. Because it's a different medium, and all of our algorithms are based on water as the medium. And it would take a lot of work for us to be able to have these work in -- to be able to work in oil and gas. And I'm not sure how long it would take for us to get there. We think there's so much opportunity on the waterside, of course, that's where we are focusing. So yes, I would -- with our technology and our algorithms, as I said, are fine-tuned to water and would not be applicable, the way they are today, to the oil or gas market.

David Rose.

Wedbush Securities. I wanted to follow up on some of the operating leverage questions. In the quarter, you mentioned that there is a benefit in workers' comp or the workers' comp was lower than expected. Was this a onetime reversal of an accrual for workers' comp or is this something ongoing?

Workers' comp is evaluated. An actuarial evaluation is done every year, and then there are true-ups from that evaluation, so it's based upon the entire portfolio of workers' comp cases and then projections. So there are adjustments periodically. This particular year, we did see a larger adjustment in Q4.

Okay. And can you quantify that a little bit? Is it something meaningful? Or is it just kind of a modest improvement?

I would say, in general, the benefit to the Mueller Co. business in the quarter was somewhere in the -- around $1.7 million, in that general range.

Okay. And then the ongoing rate will be lower, so you'll still see a recurring benefit? Is that fair?

Slight. Certainly, as I mentioned that evaluation there, there are many factors come into play and sometimes there are periodic adjustments, but -- and the base can adjust a little bit, but there's also other forward-looking factors that come into play there. So I wouldn't say that it would be a total resetting to that magnitude, but it could be a slight benefit as we go forward. But certainly, over the long term, based upon all of the actions that we've taken in the safety area, we would continue to expect to see improvement in overall cost as we move down the road in subsequent years.

Okay. And then as a follow-up to some of your lean initiatives, and I appreciate that it is a journey, but are there any specific actions you can highlight that should drive earnings or margins for next year?

I would say it's more general. Our focus has been on velocity in reducing our delivery lead times. We've mentioned in the past that our distributors, they continue to manage their inventory closer and they continue to rely on us to deliver the product quicker. So I think that we are certainly seeing some advantages on the cost side, but where I think we're seeing the more of the advantage is that our delivery cycle times are down that allow us to meet demand by carrying less inventory, and sometimes, even demand a higher price for that quicker delivery. So it would be difficult for me to point to any 1 or 2 specific areas. And I think you described it best; it's a journey, and it impacts the -- I do think, our overall processes.

Okay, great. And then the last question, if I may, is on leak detection. You've talked about expanding this internationally outside of North America. Can you update us on the progress and potential for acquisitions on that front as well?

Yes, we are still talking small numbers, but we've seen very, very nice growth in Australia. We made an investment in that market, and we saw our business more than double there in fiscal year 2013. But again, that is -- we're still talking very small numbers. And I would say that if we look at the acquisition, we still think that there's more and more opportunity as we build our capability to address these markets. And I would say that, that would be an area that would get our attention if we saw an acquisition opportunity to increase our presence in international markets on the leak-detection side. But there's nothing specific that we're looking at right now.

That was our final question. So I'll turn the call back over to Mr. Hyland for closing remarks.

Well, again, we are -- like I said earlier, we are pleased with the performance of 2013 as we benefited clearly from improving markets, but also with some of the improvements that we've made in our overall businesses and processes. We are -- as we sit here today, looking at our markets, that we are encouraged by what we expect to see as continued growth in the housing market, which will be the biggest driver of demand for our growth. And again, the most recent advancement and orders that we've been able to win on our metering side puts in a stronger position today. So we are looking forward to 2014 and certainly appreciate your interest in the business.

That does conclude today's presentation. Thank you all for joining. You may now disconnect.