Welcome, and thank you, all, for holding. [Operator Instructions] Also, today's 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.

Thank you, Laurel, and good morning, everyone. Welcome to Mueller Water Products 2014 Second Quarter Conference Call. We issued our press release reporting results of operations for the quarter ended March 31, 2014, yesterday afternoon. A copy of it is available on our website, muellerwaterproducts.com. Mueller Water Products had a 159.3 million shares outstanding at March 31, 2014. Discussing the second 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. Reconciliation between GAAP and non-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) 418-8386. The archived webcast, 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 comments, we will open the call to questions. I will now turn the call over to Greg.

Thanks, Martie. Thank you for joining us today as we discuss our results for the 2014 second quarter. 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 2014. We are pleased with 13.4% year-over-year improvement in our adjusted operating income during the second quarter, especially given adverse weather effects experienced in many parts of the United States. Mueller Co.'s net sales increased 1.7% year-over-year. Domestic orders for valves, hydrants and brass products grew over 20% in the second quarter, which we believe reflects the continued strength of our key end markets. Most of this increase in orders is not reflected in the quarter's shipments due to the timing of Mueller Co.'s price increase this year compared to last year, and to some extent, the harsh winter weather. Mueller Co.'s adjusted operating income increased 18.3% year-over-year in the quarter, with improvement across all product lines. I'll provide more detail later in the call. Although Anvil's net sales increased slightly, its adjusted operating income declined 6.5% and its adjusted operating margin decreased 80 basis points to 8.9% due primarily to operating challenges during the quarter at its largest manufacturing facility. Overall, we continue to believe consolidated results for the balance of 2014 will continue to improve year-over-year, primarily due to expected growth in most of our key end markets and the benefits of stronger operating leverage, particularly at Mueller Co. With that, I'll turn the call over to Evan for a detailed discussion of our financial results for the quarter.

Thanks, Greg, and good morning, everyone. I'll first review our second quarter consolidated financial results and then discuss segment performance. Net sales for the 2014 second quarter of $288.1 million increased $5 million or 1.8% from the 2013 second quarter net sales of $283.1 million, due primarily to higher prices and higher shipment volumes. Gross profit increased 6.3% to $82.2 million for the 2014 second quarter compared to $77.3 million for the 2013 second quarter. Gross profit margin of 28.5% in the 2014 second quarter increased 120 basis points from 27.3% in the 2013 second quarter. This improvement was driven primarily by higher sales prices and higher shipment volumes. Selling, general and administrative expenses were 18.8% of net sales in the 2014 second quarter as compared with 18.6% in the 2013 second quarter. Selling, general and administrative expenses for the 2014 second quarter were $54.2 million as compared with $52.6 million in the 2013 second quarter. This year, expenses associated with liabilities related to the company's former U.S. Pipe business and retained by the company are now being included in continuing operations, whereas a year ago, they were included in discontinued operations. The increase in SG&A is primarily related to these expenses. We believe most of these expenses will decline over time. Adjusted operating income for the 2014 second quarter increased 13.4% to $28 million as compared with $24.7 million for the 2013 second quarter. This increase was due primarily to higher sales prices and higher shipment volumes. Adjusted operating margin also improved 100 basis points to 9.7%. Adjusted EBITDA for the 2014 second quarter increased to $41.8 million as compared with $39.7 million for the 2013 second quarter. Adjusted EBITDA for trailing 12 months was $166.5 million. Interest expense, net, for the 2014 second quarter declined $300,000 to $12.5…

Thanks, Evan. I'll now elaborate on our 2014 second quarter and end markets, provide an outlook for third quarter and comment on 2014 expected performance. I'll begin with Mueller Co. Overall, Mueller Co. net sales during the quarter grew 1.7% year-over-year. Net sales from our core domestic iron gate valves, hydrants and brass products grew 7%. As we discussed last quarter, we expected that several factors would impact shipment comparisons during the second quarter. Specifically, we noted the timing of our price increase this year on valves and hydrants compared to the timing of last year's price increase, and that we would have 3 fewer weeks this year than last year to ship the orders received before the price increase. We also mentioned that severe winter weather would affect the timing of shipment. We believe these factors contributed to domestic unit shipments for valves being up only 1% and hydrant shipment up 5%. Net sales growth of Mueller Co. this quarter was also impacted by declines in areas outside of our core valve, hydrant and brass products. Net sales declined $1.3 million for our Pratt product line as we have not yet seen a rebound in spending for water treatment facilities Net sales from Mueller Canada declined $1.5 million, primarily due to foreign exchange. And international sales declined $1.5 million. Net sales of metering systems were essentially flat from last year and sequentially. We believe demand for our core valve, hydrant and brass products was much stronger than our shipments in the second quarter may indicate. For example, domestic unit orders for iron gate valves during the quarter were up 23% year-over-year and hydrants were up 20%. We were encouraged by the year-over-year growth in orders from distributor ahead of our price increase, which we believe suggest a positive outlook…

[Operator Instructions] Our first question today comes from Mike Wood.

This is Adam in for Mike Wood at Macquarie. Quick question, do you guys still expect to recognize the $6 million to $7 million in shipments in 3Q that were pushed out given the timing of the price increase?

Yes, we would expect, Adam, that those would flow into Q3. As I said, that we went into our third quarter this year with a significantly higher backlog on valves and hydrants. Certainly, some of that backlog is due to the timing difference of the price increase last year and this year. So yes, we would expect that, that $6 million to $7 million would probably ship early in our third quarter.

Okay, great. And then just on the Mueller Co. side, really strong incremental margins, did you see a benefit in 2Q from the price increases that you had enacted on the lead-free hydrants?

Adam, maybe to some extent, but that wasn't the key driver, I think, of the strong conversion margins in Mueller Co. We benefited from improved performance and a more favorable mix, actually, with our metering systems. Revenues were essentially flat, but operating income improved about $1 million. So certainly, our performance at our Mueller Systems was a strong contributor to conversion. And as I also talked, revenues for our Pratt product line were down about $1.4 million year-over-year, but operating income for Pratt was up $1.6 million. So those 2, both our Mueller Systems and Pratt, contributed very nicely to the conversion margin. And then I think that, then in addition to that, we did benefit from higher prices, particularly shipment of our lead-free brass products have grown significantly and now account for a vast majority of our brass products sales, and I think as well as higher sales prices of valves and hydrants. So I think that there were really a number of factors that contributed to the strong conversion margin at Mueller.

Our next question comes from Michael Gaugler.

Brean Capital. Taking a look at the balance sheet, I've noticed you've been sitting around $600 million in debt or so now for 6-or-so quarters. Cash has been kind of building up a bit. And now you're coming into a seasonally strong free cash flow period. I'm wondering what your thoughts are in terms of what you're going to do with the cash here in the next couple of quarters.

Yes, Mike, we -- I'll let Evan go into a little more detail here. Our leverage -- net debt leverage is 3x, you pointed out, and certainly, as we get into the stronger -- as we get into the construction season, we would think that, that would continue to improve. We've been pretty consistent the last several years in saying that we would -- that we're still focusing on bringing down debt, our overall debt. So that our objective was to get our net debt leverage below 3, and once we got below 3, then we would look to have a little more flexibility. We are somewhat constrained on what we can do. And I'll ask Evan to go into some of that.

Yes. Our flexibility, with respect to debt retirement share repurchased and dividends, is somewhat limited, as long as we have 8 3/4% notes outstanding. And as a reminder, they are not callable in a predetermined price until September 2015. We do, however, have a restricted payment basket of about of $65 million, which can be used to repurchase the sub notes, the 7 3/8% notes, or for share repurchases or dividends above $15 million annually. Obviously, other potential uses of free cash flow could include acquisitions. But certainly, over the past several years, as you know, debt retirement has been a key focus. We continually monitor -- or more [ph] continually monitor our cash position, evaluate our capital structure and all alternatives to determine the overall best allocation of capital resources.

Yes. So Mike, it's a good question. And we do think that we will certainly continue to generate the cash we'll build up. We'll look to see what we can do on the debt retirement side. We're somewhat limited to what we can do on any stock buybacks or additional dividends. So that September date of 2015, really, is a key milestone for us in terms of giving us a lot more flexibility on what we can do with cash.

Greg, do you have any windows opening between now and September '15 on the 8 3/4% where you could still pay off some of it?

We do not. We -- in the past, we had 3 windows of a certain feature where we could retire about 10%, but that has expired. So we do not have any windows there. And we did take advantage of a couple of those windows and retired right around a little over $45 million of that debt under that certain feature.

Our next question comes from Jerry Revich.

It's Goldman Sachs. I'm wondering if you, gentlemen, can talk about the cadence of orders at Mueller Co. over the course of the quarter. And I appreciate the fact that you've got the price increase timing in there. But I'm wondering if you can just help us get a broad sense of whether demand accelerated over the course of the quarter as we seem to have heard from a couple of construction materials companies. Wondering if you're seeing the same underlying trend as the weather improved, particularly into March, projects really accelerated. Can you just give us a sense, if you can? That would be helpful.

Sure. We were probably not consistent with others because of our -- because of the timing of our price increase. If you look at last year, as we said, our price increase was in the third quarter -- I mean, third week of January; this year, the second week of February. So for us to do a valid analysis, we took the January, February time period of last year versus the January, February time period of this year. And if you look, for instance, at our valves and hydrants, our orders during those -- that time period, our orders were up 25% on valves and hydrants on a year-over-year basis. So clearly, we saw a -- our distributors deciding to even buy more ahead of the price increase they did last year, which, again, we think reflects that they're bullish on projects when we get in construction season. We did see, however -- since we saw such a nice growth in orders in January and February, we expect that March would fall off year-over-year. And in fact, we were pleasantly surprised that our March orders actually grew this year over March orders last year for Mueller Co. So in a way, we may have seen that same phenomena. It was just somewhat distorted because of the timing of the price increase and, of course, that with our distributors, they have to get their orders into us before the price increase goes into effect to protect that pricing.

Okay. And Greg, would you be willing to comment how April is stacking up as well, since that's a little further out from the price increase? Maybe we can get an apples-to-apples comparison.

Yes. I would say that right now, April is pretty consistent with the outlook that we've been giving.

Okay. And then in terms of the industry's shift towards the lead-free products, can you give us a sense for whether there is a scope for additional products to potentially shift over as well, where are we in that process, broadly beyond brass products?

Yes, good question, Jerry. I'll tell you, with the -- what happened in the industry in October of last year, when the EPA made a preliminary decision that, that legislation would apply to components in a hydrant and then subsequently came back and said, reverse that decision. But I think that it, in a way, implied that they would prefer if utilities or municipalities would eventually switch to non-leaded components. At least in our products where we compete, I think they have pretty much covered -- we now covered all of the products that can be affected. I'm sure we could always be surprised. But I think that we're covered now. So clearly, brass products on January this year had to contain no lead. The industry made that because we had 3 years to be prepared. So that was a pretty smooth transition. As I said, the hydrants caught us by surprise. I think that we -- there's a plan going forward there. Our expectations are that probably by the end of the year, most, if not all, hydrants will contain components that are no lead. However, the industry does have -- can work off its existing inventory. And then from there, I think we're pretty well covered.

And so on the hydrant side at this point, what you shipped in the quarter, what proportion was non-lead?

By far, the vast majority was non-lead, but we did use this as an opportunity to take down our inventory, get rid of our inventory of leaded -- any leaded component. So going forward, we will only be manufacturing and shipping non-lead. I would suspect that there's probably still some distributors that have leaded components in inventory. And for sure, some of our end users have in their inventory, those with leaded components. But I would -- as I said, I would expect that looking at the calendar year, that most of those will have gone through the system.

Okay. And Evan, can you just step us through where we are in the ERP rollout? Are there any additional plants scheduled to move forward? And can you just give us a sense for how that process is going upside and what happened this quarter?

Sure. We're 12 months into the new ERP implementation system at our Anvil business. And we did implement at the largest facility in January. We experienced normal startup issues during implementation in other locations but experienced no significant impact on operating results. And what we're doing here is, Anvil's been operating on a number of systems. We're bringing that down into one to add efficiency overall. But for the largest facility, it's complete, but it did exacerbate the operational challenges that we experienced in the second quarter.

Yes, Jerry, in fact, let me go a little further, because I don't anyone to be confused. As Evan pointed out, probably the results at Anvil in the quarter may be somewhat exacerbated by the ERP implementation, but that really didn't cause our issues. We had 2 primary issues, and probably both of them fall into the category of preventative maintenance. We lost an annealing oven for a month. Our plant management there thought that this oven could continue operating until the next scheduled maintenance period, and it couldn't. The other issue was that in one of our melting furnaces, where we had a thin spot in the form of lighting, we actually burned a hole in the furnace, and that was a several-week repair. And probably, what impacted us the most is that we're somewhat unique. Anvil, at this facility, is somewhat unique since we run several types of iron at this facility. Generally, our furnaces are dedicated to a single type of iron. So once we lost this melting furnace, we had to utilize furnaces that were dedicated to other types of iron. So in order to do that, that when we switched from one type of iron to another, we had to shut down the furnace, clean it out completely, before we could begin melting another type of iron. We incurred a lot of inefficiencies over time. We said that, that hit us for about $1.3 million margin impact on Anvil in the second quarter. As I said in my prepared remarks, there's about $3.5 million we expect that's in the inventory now that will hit us in the third quarter. That will be behind us then. But we did everything that was necessary to make sure that we didn't miss any of our shipment obligations to our customers. But that being said, we have a little bit to go on the ERP implementation. We've been implementing it before. It really didn't impact the quarter. I don't think it would have had much of an impact this quarter if we didn't have those furnace issues.

Our next question comes from Ryan Connors.

The firm is Janney Montgomery. I wanted to drill down on this issue of distributor restocking, Greg. You've kind of referred to it a few times, and kind of want to get your sense because if it is, in fact, an increased confidence in the rebuilding inventory, I think it's a pretty powerful signal for the end markets. So can you just give us a little more color there on how much you really think that is an indicator of sentiment rather than noise around the price increase, and also whether there are any regional dynamics and differences there?

Yes, yes. Well, we do think it's certainly a positive indicator. And we based that on -- as I referenced little earlier, that we thought 25% growth year-over-year in valves and hydrants tied into that timing of the price increase. We saw orders from distributors in this price increase bringing orders forward that we hadn't seen in the past. So that certainly told us that they were feeling a lot more bullish. Our distributors, when we go across the country, are generally bullish. They have shared with us that -- in fact, when we look -- entering this quarter, that our distributors in absolute -- our inventories, that our distributors in absolute dollars have increased. But we see really no -- we'll say no issues with too much being in inventory because they fully expect to turn it. In fact, a number of our distributors, when we followed up on the orders that they pulled forward, said that we already have projects down the road in our backlog that we'll be using these for. So it was a very -- right now it's -- we're saying it's a very positive indicator from -- indication from our distributors that they're bullish, both from the context of they're willing to up the amount of inventory that they're carrying, and this is probably the first time, certainly, in several years we've seen that; and their belief that they'll reached the turns that they expect. Relative to what happened regionally, I would say that we saw, almost across the country, distributors increasing inventory with perhaps less so in the Northeast. And again, we think that, that was related to weather. And our distributors in our field sales force tell us that they do expect that business is going to pick up. But as I say that, we've even seen April in the Northeast start off a little slowly, and what's coming back to us is that it's still weather-related. So I think that we were very pleased. I think we said on our last call that we'll have a pretty good idea on how sustainable or how strong the recovery is based on the kind of orders or the order growth we see placed ahead of the price increase. And as I've said, we were pretty pleased when we saw in that January, February time frame on a year-over-year basis, orders up 25% and, again, seeing orders from distributors being pulled forward that we haven't seen in the last couple of years.

Great. And then over on to the metering business, Greg. If that business is to come back, you said that the outlook there is positive. Can you give us an idea, specifically what types of customers and what types of products, whether it's advanced AMR stuff or whether it's more of the basic flow measurement? Because you really -- you had a major customer win last year. And I guess, what we've seen since then is a lot of smaller fish. So can you give us some color around exactly what those deals look like?

Yes. I would say we're still dealing with the smaller utilities and still looking at the -- we're seeing -- from a quotations standpoint, we're quoting much more AMI business. I don't know, maybe that's indicative of this market, as maybe where we're positioned -- we think it's both where we're positioned in that market, as well as the growth in AMI. But we expect, probably in the next -- I would say within the next quarter, to be addressing some pretty large quotations, issuing some pretty large quotations to larger fittings, so larger municipalities. So I would say that right now, what we're seeing is probably consistent with what we've seen over the last 12 months. A greater percentage of our quotations geared towards AMI. Probably, it's still -- we're still dealing with the midsize, the smaller-size municipality, but expect to start making some quotations in the next quarter to some larger fittings.

Great. And then last question for me, I guess, is more for Evan, following up on the balance sheet discussion. As you have discussions with the rating agencies and so forth, I would imagine they are pretty happy with where the company's come from a leverage standpoint and from a fundamental profitability standpoint. Is there -- can you kind of update us there? I mean, what are the latest outlooks are and how those discussions are progressing and whether you think there is any positive trajectory there?

Well, certainly, as you know, last year we had improvement in our ratings from both S&P and Moody's. And we have frequent conversations with our rating agencies. I really can't project exactly where we'll go from here, but certainly, as you saw last year, and from the commentary, both from our net debt leverage, as well as our improving EBITDA position, I would say that they've been fairly pleased.

Our next question comes from Nick Prendergast. Nicholas V. Prendergast - BB&T Capital Markets, Research Division: It's BB&T Capital Markets. I just want to make sure I'm absolutely clear on these Anvil inefficiencies and how much flows into Q3. But in your prepared remarks, my takeaway was it's going to be a $3.5 million headwind to Anvil's EBIT in Q3. Am I understanding that correctly? Because I think you mentioned inventory in the Q&A.

Yes, yes. Yes, Nick, that's absolutely right. And what happened is that we saw about in the second quarter an impact of $1.3 million, but those inefficiencies going to inventory and then hit the P&L as inventory turns, so the bulk of the inefficiencies will hit us in Q3. And we're estimating that it's $3.5 million. So in total, between the second and third quarter, it's around a $5 million impact. Nicholas V. Prendergast - BB&T Capital Markets, Research Division: Okay. And then since that's rolling in inventory, is that much of COGS then?

Yes, that's cost of goods sold. We're on the FICO method of accounting, so effectively, it goes into the per unit cost of your inventory and then flows out based on inventory turns. And so, as Greg mentioned, that will kind of flow through the income statement, that impact of about $3.5 million in the third quarter. Nicholas V. Prendergast - BB&T Capital Markets, Research Division: Got it, got it. And then you noted the adverse weather impacts in Q2, did you quantify that?

No, we didn't. And Nick, I'll tell you, we just don’t know how to quantify it. But we know we've had -- that we had distributors that were shut down for a couple of days at a time. We had -- there were just a lot of areas that we just weren't able to do work outside. So we really don’t know what the impact was. So clearly, though, we knew it -- we know that our shipments were reduced as a result of it. Nicholas V. Prendergast - BB&T Capital Markets, Research Division: No, that's fair, that's fair. And then, finally, it sounds like you are actually expecting a little bit of lift in non-res construction in the second half. Is that true? And then, I guess what gives you confidence that, that may occur?

We said that last -- we mentioned that on the last quarter that we thought we might see it in the second half of the year. We're hearing discussion in the marketplace that -- more talk about project activity, but we're not seeing it yet. So I think that we're probably making those comments a little on the come. If you look at the ABI index, it's been bumping up and down. 1 month, it's above 50, which indicates it's positive territory. Next month, it's below 50 and so on. So we think it's certainly mix. We haven't seen any growth in the first half of the year. We think we may see modest growth in the second half of the year, but it -- I would say that we're not saying that with a lot of confidence.

Next question comes from Seth Weber.

It's RBC. So just going back to the Anvil production hiccups, Mueller, historically, has been a company with relatively low CapEx. I mean, does this suggest that we need to start raising maintenance CapEx here going forward to prevent some of these issues that may occur?

No. Seth, we were all over that, as you would expect, and we looked at it. And we started looking on a year-over-year basis, total maintenance spending at this facility to try to determine if, in fact, that, that's what was happening. And it is not. We found that a number of people dedicated to maintenance -- to spending on maintenance was consistent year-over-year. I think what happened was the plant management on the one furnace thought that they could wait till the next outage, scheduled outage. And as I said, they didn't. And then the thin lining spot, it's unusual, but not necessarily uncommon. But then that's a very good question, and we've looked at the very -- we looked at that -- had that very same question. And not so much on the capital, it would have been an expense issue, but we looked in the -- nothing unusual at this plant in terms of the maintenance expense dollars over the last couple of years.

Okay, that's very helpful. Maybe just switching gears to the Mueller Co. business. On the residential side, we're starting to hear some mixed messaging around new housing development. And I'm wondering are you still seeing an uptick in raw land development? And how should we -- how are you thinking about the residential market this year or into next year?

As I said that, right now, our outlook -- and then, certainly, we pay close attention and we've seen some of the analysts becoming a little less bullish. But we have not seen anything that alters the outlook we're providing for the last 6 months. And we think that what at least supports our outlook is the development of raw land. We just had some of our distributors report some developments going in their territory and the size of the development, they said, goes back to the time when -- in 2005, 2006, when that industry was booming. So right now, it looks like land development supports our expectations and outlook for the year, but our antenna is certainly up based on, I would say, some of the reduced -- reductions in forecasts over the last couple of months.

Right, okay. If I could just slide one more in. I think after the last quarter, we had talked about a MS & E [ph] growth of about 25% for 2014. It sounds like maybe that's going to be a little bit below 20% this year. I mean, is that -- I know this is a business that's hard to handicap. And did something just slide around on you, did something get pushed out or...

Yes, Seth, we've adjusted that outlook a little bit when we looked at -- and we meet pretty regularly, as you would expect, with our largest customer in that business. And the current outlook is that our largest customer believes that they will not need -- they will be installing fewer meters this year than what they did last year. So probably, the biggest impact or the biggest driver of our bringing down the outlook a little bit is the reduced expectations from our largest customer. So I think other than that, the market and orders are playing out as we expect. On our Jackson, Mississippi, the biggest orderer that we have in our backlog, through 6 months, we've shipped about 50% of that and still expect to be able to ship the remaining the second half of the year. So just -- we're making a slight adjustment in orders that we expect to see from our largest customer.

Next, we have Kevin Bennett of Sterne Agee. Kevin C. Bennett - Sterne Agee & Leach Inc., Research Division: It's Sterne Agee. Greg, 2 questions for me. First, I was wondering if you've seen any impact from higher raw material costs and how that's going to play through as we go throughout the year or if it's still kind of benign?

Yes. I think that we would put it in the benign category. We have seen maybe a little movement on brass and a little movement on scrap. But right now, nothing of -- what I would say that's material. And as we look over the next -- the remainder of our fiscal year, we don't think that we will see a negative -- much of a negative impact, if any at all, from higher raw material costs. Kevin C. Bennett - Sterne Agee & Leach Inc., Research Division: Okay, that's great. And then one last question for me on the leak detection business, which you haven't really talked about much. I know you've been doing a lot of pilot programs around the country and was wondering how those were going. And when do you think we're really going to start to see the impact from this business on the P&L?

Yes, the pilot -- a lot of the pilot -- we're moving from the pilot phase into those turning into real orders. We've had a number of those, actually, the last -- I would say, the last 4, 5 months. Probably the one business that was impacted even more so in the last quarter was our leak detection business from the weather. But no, when we look to the second half of the year, we think that we will see a very nice uptick in the project activity, in our leak detection business. You've heard us talk in the past about we were in the pilot stage on our fixed transmission leak detection and distribution leak detection. That's moving nicely. We're getting closer to commercialization there. And so I hope to be -- we're in a position in the next couple of months, actually, to make a few announcements about some nice project work that we're winning at Mueller Systems.

Our next question comes from Walter Liptak.

I wanted to ask about the Mueller Co. business on the guidance. You talked a little bit about the third quarter operating profit and the margin. But given the strong leverage that you had this quarter, I wonder if you could talk a little bit about what you're expecting from leverage for the third.

Yes. We'd say, in total, for Mueller Co., that we would expect the leverage to be at least 35%. I think as we look out, that we're very confident with the 35%. And certainly, if you look at the last couple of quarters, we've doing better than that. So we would expect it's reasonable for us to do better than the 35%. We look like we should have a good valve and hydrant mix, certainly, given our increase in backlog. So Walt, I would say that we would expect to be in the 40% plus range in our conversion margin for Mueller Co. in the third quarter.

Okay, great. Is there anything that we should be concerned about? You'll be shipping quite a bit of product. Are there capacity issues, how do you run those...

No, no, capacity, we're fine. We're working 2 shifts in our Chattanooga facility and our Albertville facility. As many of you know that probably a year ago and for quite some time, we've been only working 1 shift. So we've been able to ramp up. We've been able to staff those shifts. So if we can dodge any of -- all of these tornadoes the next day, because our plants happen to be in the passage that they're projected, we feel pretty confident that, from a manufacturing standpoint, we have the capacity to be able to make the shipments.

Next, we have David Rose.

Wedbush Securities. Most of my questions have been answered. The last one, though, is if you could provide a little bit more color on the fire hydrant sale decline, last quarter was, I believe, 13%. How do you think about what happened to those orders, is that baked into your bookings numbers up over 20% for the period? Did they go away? Should they be higher?

Yes. David, great question. Actually, the 13% -- yes, I think the 13% you're referring to were the decline in shipments. And we actually -- we think that, that fall off or that occurred from mid-October -- probably end of October through November when we had all the conversation and the disruption in the marketplace, with discussion about lead-free hydrant. We actually saw our bookings pick up later in December. We think we saw some of that shipment impact in the third -- or in the second quarter here because that -- if you recall, we said that on a year-over-year basis, domestically, our valve shipments grew 1%, but hydrants grew 5%. So we think that so often, valves and hydrants move in tandem. We think that the higher growth rate in shipments in hydrants this quarter was probably, we were shipping some of those orders that were delayed and we didn't receive to the end of the first quarter -- our first quarter. But we do think that also, we still didn't see all of that flow through yet because of weather. So I think that in the third quarter, we do expect to see -- from a shipment standpoint, we still expect that we will be shipping probably some of those orders that came in, in late December that were delayed during the uncertainty of the no-lead hydrants. I hope I got your question there. I don’t think that it played too much in the increase that we saw in orders because we did -- we do believe we saw most of those orders come in at the end of our first quarter. But we do think we will still have some of those in our backlog to ship in the third quarter.

Next we have Sean Wondrack.

This is Sean Wondrack on for Philip Volpicelli, Deutsche Bank. Could you just remind me, please, the size of your price increases, on which individual products, and how much of that price increases you're able to stick, please?

Yes, we increased our valves in the -- we increased our valves 7% in -- there in early February. And our hydrants 5%. But the difference there was in December, we had a price increase on hydrants as we switched to the unleaded components. So on the -- valves up 7%; hydrants, probably about the 8%, 9% range. Typically, we expect to see a 50% to 60% of that pricing stick.

Okay. And so you said plus 5% on hydrants in early February, but then you said 8% to 9%. So is that the compounded price increase considering December and February?

Yes, that includes -- as I said, we had a price increase on hydrants in December when the industry -- when there was a -- when we shipped from leaded components in the hydrant to unleaded components. That was a couple of percentage points. So then we, in February, had another price increase. So the combination of that price increase in December and the February price increase puts it in that 8% to 9% range.

And at this time, I have no further questions.

Well, again, thank you, all, for your interest in Mueller Water Products.

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