Good day, ladies and gentlemen. Welcome to the First Quarter Fiscal Year 2014 Parker-Hannifin Earnings Conference Call. My name is Philip and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Pamela Huggins, Vice President and Treasurer. Please proceed, ma'am.

Thank you, Philip. Good morning, everyone. Just as Philip said, this is Pam Huggins speaking, and I'd like to welcome you to Parker-Hannifin's First Quarter Fiscal Year 2014 Earnings Release Teleconference. Joining me today is Chairman, Chief Executive Officer and President, Don Washkewicz; and Executive Vice President and Chief Financial Officer, Jon Marten. For those of you who wish to do so, you may follow today's presentation with the PowerPoint slides. They've been presented on Parker's website at www.phstock.com. And for those of you not online, the slides will remain posted on the company's investor information website 1 year after today's call. At this time, reference Slide #2 in the slide deck, this is the safe harbor disclosure statement addressing forward-looking statements. And if you haven't already done so, please take note of this statement in its entirety. Slide #3 addresses non-GAAP financial measures. This slide, as required, indicates that in cases where non-GAAP numbers have been used, they have been reconciled to their appropriate GAAP numbers, and they're posted on Parker's website as well. Moving to Slide #4, outlined the agenda here. The agenda for today consists of 4 parts. First, Don Washkewicz, Chairman, Chief Executive Officer and President, will provide highlights for the quarter. I'll come back on second and provide a review, including key performance measures for the quarter, along with the revised fiscal year 2014 guidance. And then the third part of the call will consist of our standard question-and-answer session. For the fourth part of the call today, Don will close with some final comments, as usual. So at this time, I'll turn it over to Don and ask that you refer to Slide #5 titled First Quarter Fiscal Year 2014 Highlights.

Well, thank you, Pam, and welcome to everyone on the call. We certainly appreciate all your participation today. I'll make a few brief comments and then Pam's going to return for a more detailed review of the quarter. I'm certainly pleased with -- that we're off to a good start in the first quarter. We continue to execute well in spite of a moderate growth environment out there. Some highlights for the quarter. Sales remained flat, as anticipated, with acquisition sales offset by divestitures. We were pleased to see our order rates turn positive for the quarter, for the first time in 5 quarters, as we showed a 5% improvement year-over-year. Our order growth is consistent with marginally positive trends that have been reported across major economic indicators of industrial production. Total segment operating margins were strong at 14.4%. I'll just point out that the Diversified Industrial segment operating margins were above our 15% target, at 15.3%. So we're very pleased with that. And of course, that was helped by 110 basis point year-over-year improvement in our International business. Earnings per the diluted share increased 2.5% to $1.61 compared to a prior-year quarter. Excluding restructuring expenses, earnings per diluted share were $1.67, or an increase of 6%. We consistently generate operating cash flow greater than 10% of sales, coming in at 11.1% in the first quarter before a discretionary pension contribution, and that contribution was about $75 million. We remain on track to deliver our 13th consecutive year of cash flow greater than 10%. So again, that's a nice record that we'd like to keep going. Just a few comments about our restructuring. Restructuring this quarter was $12 million, or $0.06 per diluted share, and that was on a forecast of $19 million, or $0.09 per diluted share. We're still…

Thanks, Don. So at this time, if you'll reference Slide #6, I'll begin by addressing earnings per share for the quarter. It came in at $1.61, as you saw in the press release for this morning. That compares to $1.57 for the same quarter a year ago, an increase of 3%. If you exclude the restructuring expenses, this quarter's earnings per diluted share was $1.67, an increase of 6%. So, moving to Slide #7, this lays out the components of the $0.04 increase in fully diluted earnings per share for the first quarter versus the same quarter a year ago. And you can see that higher operating income, while it shows $0.01 on that Slide, was really $0.06 when you exclude the restructuring. Our International business came in very strong. There was some offset. It was partially offset by lower income in Industrial North America and then of course, the Aerospace business. The items below segment operating income accounted for the remaining $0.03, and this was mainly due to a discrete tax benefit of $0.08, which was offset by a higher corporate and general and administrative expense and other expense. It was $0.03 for corporate G&A and $0.04 for other expense, mainly due to market-driven benefits. So moving to Slide #8, looking at the top line, revenues for the quarter increased 2% as a result of acquisitions. So revenue moved to $3.23 billion from $3.18 (sic) [$3.21 billion] last year. And of course, we took the opportunity to adjust for the divestiture of the automotive air-conditioning business in October of last year. So these slides are a little bit different for those of you who follow these slides closely. We did take the opportunity to restate fiscal year '13 for the divestiture. Segment operating margins for the quarter at 14.4%,…

[Operator Instructions] And your first question comes from the line of Andy Casey from Wells Fargo Securities.

On the revenue guidance, it looks like you took the top end a little bit lower. Could you talk about what changed to drive that decision?

Yes. Andy, Jon here. I think what we did was we looked at our actual results for Q1 and we were comfortable with what our growth rates were that was contained in the original guidance. And because our quarter came in very solid, as -- almost as expected, we ended up deciding to keep the guidance where it is. You'll see in the components of the guidance on the top line, that Aerospace is down a little bit and North America and Industrial International is coming along as projected here for us. So that was our thinking at this point and that's how the comparisons came in for the Q and for the year as we rolled everything up from the bottoms up.

Okay, Jon. And then a follow-up. The cash flow, very, very strong again. You have substantial capital allocation potential. Could you update us on what the acquisition pipeline looks like?

This is a Don, Andy. We're always looking, with respect to the acquisitions, as far as what's out there. And of course, that's one of our main drivers as far as capital allocation this year, is to try to find some good acquisitions. I can never forecast what we're going to get to the finish line. We're always looking, we're always evaluating, and it's hard to predict what you're going to get to the finish line. So -- but that is a priority for us. The acquisitions are a priority. But also, I just might want to mention along with that, that as far as capital allocation, that we're still maintaining a focus on dividends. We've had a major increase over the last 5 years in dividends, and last year was about a 10% increase. And just so that everybody knows, we finished the year last year at about a 27% payout on dividends and we're looking for something north of that now, closer to 30%. Of course, that hasn't been approved by our board. I'm just telling you what I'm -- would be comfortable with and what we said, we're going to be trying to get closer to that 30% number, and that's what our intent would be this year. So dividends are going to be a priority. Obviously, acquisitions are way up -- way high on the list and we're continuing to look at those. The only other comments on capital allocation that I would make, would have to do with share repurchase and we'll do about $200 million as a minimum this year. We did $50 million in the first quarter and we'll continue that at $50 million a quarter and then potentially do more than that, depending on where we end up with our cash balances and the acquisition pipeline toward the end of the year. The only other thing is that -- we did mention earlier, is that we did put $75 million into the pension as well.

Your next question comes from the line of Ann Duignan from JPMorgan. Ann P. Duignan - JP Morgan Chase & Co, Research Division: Don, would you just walk us through your normal -- what you're seeing out there by end market and by segment? You made an interesting comment that sequentially, it looked like there was an improvement. If you could just give us your normal end market color, that'd be great.

Sure. Sure, sure. Well, maybe I'll start with the PMI Indices, the ISM Index and so forth, just kind of give you a little recap of what that looks like. I think when I tell you this, it's going to be along with our 3/12 and our 12/12 pressure curves, our order rate curves. I think you're going to see that they kind of tie in pretty good with where we are as far as our order rates that we're showing and sharing with you. From a PMI standpoint, all of the indices now -- unlike in the past, all of the indices now are north of 50%. So that's a good sign. Everything is north of 50% for the global PMI and it's up slightly from the August period. So that's good. That's up from June as well. Europe, as far as PMI, has increased slightly from August -- I'm sorry, has decreased slightly from August, the Europe one. And also Germany's decreased slightly, but they're up quite a bit from June. So I'm not looking at that being a negative. I think they're still riding above 50% and that's still a positive place to be. The U.S. took a big jump. You may have noticed that yourself. It's up around 56% right now, which is really a very good territory for us. China's flat but north of 50%. It's pretty flat and that's -- we are still seeing kind of a flat environment in Asia and China, in particular. And Brazil is up slightly, but they are just right at about 50%. So they're still pretty flat as well. If you look at the markets, the positive markets that we have, as far as positive trends, would be as follows: commercial aerospace aftermarket and commercial aerospace OEM, both…

Yes, I think it's end market demand. I think that everybody has been managing their inventories pretty good, at least in that channel, for over this cycle. And I think now, they are really seeing end market demand, and I think that's consistent with the overall order trend and the indices that I've kind of highlighted. I think that would be more end market demand than anything.

Your next question comes from the line of Joel Tiss from BMO Capital Markets.

Don, you made a $5 million today on your stock, you could probably take -- you can take the afternoon off.

See, it pays to stay investor. It's never a bad time to own a Parker stock, right?

Yes, that's right. So just first question on margins, can you just talk about why so tough on the Aerospace side? It seems like the R&D cost would be coming down and we should start to see some of that benefit. And then also, the opposite on the European margins. Is there anything in there besides just the restructuring that's really pushing those margins up so quickly?

Yes, Joel, Jon here. I think, first on the Aerospace margins. Really, what we saw in Q1 was the impact of a couple of different things. One, we had a mix issue just with a little bit less commercial aftermarket than we had expected and a little bit more OEM business than we had expected. And of course, that impacts the margins. And then also, we saw some effects of some entry into service support that was required. A little bit more in development expenses and then just supporting some of the new airframes and some of the new programs that are going into service, our support cost, to be sure that we're carrying out our obligations in terms of those programs, was higher than we expected. In terms of international margins and including Europe and Asia, I think what we're seeing there is a little bit higher leverage for ourselves as the volume improves, commensurate with the order rates that you're seeing and a little bit of a better increase there. We're also starting to see the benefit in our International margins from our integration efforts from the deals that we did last year and in FY '12. So as we continue the integration process, we're starting to see slightly better margins there, too.

And just a quick follow-up. Is there any way that you can kind of ballpark the incremental margins on the organic volume growth, just so we can get a sense of, you know what I mean, how strong of a component that is to the overall improvement?

Well, are you talking about just worldwide, Joel?

Yes, and probably in Europe, too because it's been so depressed for so long.

Well, of course, our margins right now, as we are starting to go through that inflection point and our order rates are starting to go up, our MROS is higher than our normal MROS targets. We're targeting, of course, with a -- to have a cost structure that provides us on the upside, 30%-plus, and we certainly did see that in our International business here for the quarter. That's what we'll be targeting for as we go on. So we feel very comfortable through the cycle at 30% and a little bit above 30% here as we start to inflect out of the downturn and follow the order rates that we reported.

Your next question comes from the line of Jamie Cook from Crédit Suisse. Jamie L. Cook - Crédit Suisse AG, Research Division: Two questions. One, just on the restructuring action that you've taken so far, can you provide a little color about what you've done or what -- where you expect to take more actions? I don't know if you can give color in terms of workforce reduction or facility closings or any color by country. And then I guess my next question, just given the strong orders that you've seen over the quarter, I'm surprised that you're taking your revenue down. I know Andy sort of asked that. But was there anything unusual in terms of how the months progress that make you a little more cautious, or is it just it's the first quarter? Just a little more color there. Because the orders are actually better than I would've thought.

Thanks, Jamie. Just first, on the restructuring. We're still in the middle of really working out exactly what the timing of all of that is going to be around the world. We feel very comfortable with our $0.47 that we're sticking with here for the quarter and for the year. And we're feeling very comfortable with what we were able to get accomplished. We were $0.01 shy of what we wanted to do in Q1. And just to set the scale for you, that $0.01 shy of what we wanted to do in Q1 was the entire amount of restructuring that we did in FY '13. So just to emphasize how big of a program this is for us. But, as we went through all the initiatives, the initiatives are intact. They're intact for this year. And Pam has given how they breakout from the first half to the second half. And so -- but it's tricky in terms of exactly the details behind it at this point. We'll be able to probably give you a little bit more detail as to precisely how this has ended up here at the end of Q2. Now, in terms of the guidance for sales, you got to keep in mind a couple of things. One, we took a look at how we did in the quarter. We took a look at how the order rates were coming in. You got to keep in mind that the GE joint venture, from an annual revenue standpoint, is going to remove $200 million a year from us -- from our ability to generate sales. Of course, we won't be able to consolidate that in the future. And we are really just trying to just update it incrementally. We are not taking a look and adjusting our guidance anymore specifically than just feeling really good about doing well in the quarter, coming in almost just in line. And the quarter went as we expected, and our guidance range is just pretty much intact here. A little bit better in International and maybe not quite as good than some of the other segments. But overall, we felt comfortable sticking with our guidance that we put out in August.

Your next question comes from the line of Jeffrey Hammond from KeyBanc.

Couple on the Aero side. I guess is there a point in time where you start to get a little impatient about margin progression there and these lingering costs that keep popping up? And just on the top line, again, I understand the fine-tuning, but why are we lowering the top line given that we're still seeing double-digit order growth out of Aero?

Jeff, this is Don. Yes, it does got a little bit frustrating, but we're in territory that we, frankly, we haven't been before with all of these new programs. I know, we hate telling you the same story every quarter and having to push things out a little bit here and there, but we've never really been here before with this order of magnitude of new programs and complex -- if the technology was something that we had done in the past, this fly-by-wire technology is new, I think that we would've been a lot more accurate in some of our estimates. It's just hard to predict with the number of programs and the complexity. Hitting this right on for you folks has been tough, and we don't like it anymore than you do. We're doing the best we can, and we're just going to continue to stay on it and try to give you the best information we can. Some of the programs, by the way, have pushed out from a sales standpoint. We've got some orders that have been pushed out from a couple of the programs that we had worked on. So that's changed the sales mix as well going forward. I don't know, Jon, if you had anything else you wanted to add to that.

No. I think between the mix and the level of complexity and the entry into service support, that's a -- there's a lot of moving parts there, and we are really trying as hard as we can to be as accurate as we can when we update the guidance each quarter. And keep in mind that our backlog for Aerospace is at an all-time high. This is all going to pay back for us in the future. This quarter-to-quarter and year-to-year kind of fluctuation is going to occur here when we're in the middle of the unprecedented number of development programs for us. But we feel very confident that in the long run, this pain that we're going through is going to pay off for us, and it is really going to drive value for the company long term.

Okay, and then just quick housekeeping item. Can you give us the pretax restructuring charge in the quarter and where it would've fallen in the 3 segments?

Jeff, it's Pam speaking. Yes. Let me give you the quarterly amount, okay? Last time -- and I just want to make sure that I'm very clear with this, because last time we talked about $0.32. The $0.32 that we talked about last time was the net. It was basically cost less savings, okay? So we had $0.47 of cost, $0.15 of savings. Obviously, the net being the $0.32. By quarter, the costs are $0.06 in the first quarter, $0.13 in the second quarter, $0.06 in the third quarter, $0.22 in the fourth quarter, and that gets you to your $0.47. What I will say is that close to 95% of that is obviously in the international businesses.

Your next question comes from the line of Alex Blanton from Clear Harbor Asset Management.

Your CapEx for the first quarter, what was that again?

1.8% of sales.

1.8%. And what do you expect for the year in that?

It's going to be around that number, Alex. It's been fluctuating from 1.8% to 2.1%. And so we wouldn't expect it to be any less than the 1.8% and probably no more than 2.1%.

So that's about a saving of about 300 basis points from what it ran 10 years ago.

Yes, sir.

Which on $13 billion in sales is $400 million that you can use to repurchase stock or buy your own stock or buy companies. So I think that's an excellent achievement. The other question I have is on the earnings guidance, you've given that to us including the restructuring of $0.47. And if you look at the consensus number, which this morning was $6.53, it's in the middle of that range. But I believe that, that consensus excludes the $0.47. Is that correct? So that if you put that $0.47 back in, the consensus would be $6.06 compared with your $6.10 to $6.70 number. Is that correct? Is that the way we should look at that?

What I would say about that is we worked very hard in the quarter to try to get everybody on the same page with respect to inclusion or excluding that. And it was very difficult to do that.

So you mean the $6.53 consensus is a mixture of people that are including restructuring and those who aren't?

There could be some of that in there, Alex.

Because usually, they work pretty hard to make everybody on the same page at first call.

Right. Well, we had a couple of things moving around this time. We had the JV gain, as well as the restructuring. And we were pretty good at getting the JV gain excluded, but on the restructuring side, it was quite a challenge, let me tell you.

Okay. So you don't really know what the clean number is?

Well, we think most of those numbers exclude the restructuring -- include the restructuring, sorry. And the reason I say that is because we gave guidance with restructuring in it. So most of the people followed the guidance that we gave.

Alex, this is Don. Just one follow up on the comment that you made just a minute ago. I think it's a very good observation. It's something that I think we tend to miss because you're looking year-on-year but you don't look over the longer run and see that because of our WIN initiative that we started back in the early 2001 time frame that we've been executing on, we have really driven the need for capital down drastically throughout the company, plus the need for facilities and so forth because we're driving inventory out of our system by executing Lean. It's been really a positive -- probably one of the most positive things we've done in the company. But what I want everybody to understand is that the dividend increase scenario that we've been executing here, 114% increase over the last 5 years, would not have been possible had we not driven this capital expenditures down to where we were. That's where the money is coming from that I'm using now to pay back to our shareholders. So I just wanted to make that tie-in because it's exactly what's happening here. We feel a lot more comfortable that we can raise that dividend given the fact that we've done the heavy lifting here.

That's an excellent point. Lean applies to the management of capital as well as the management of factories.

Absolutely.

Your next question comes from the line of Stephen Volkmann from Jefferies.

Don, I'm wondering, can I take you back to capital allocation for just a moment here? And I'm curious, as you talk about your focus being on acquisitions, is there any way to sort of size for us what might be in the pipeline? I realize it's not over till it's over, but is there a chance that there's something kind of a little chunkier that we're waiting to do here? And have you changed any of your thoughts about what you're willing to pay for these things?

No. I think that what we're willing to pay, I think we're pretty consistent on that. We do a valuation here, and we're pretty -- we haven't really changed our method of evaluating or coming up with a value in our discounted cash flow approach over the years. It's been pretty stable. The ones that we're looking at are not in the $1 billion category for the most part. I mean, there's only a handful of those that we would consider. If they were available or actionable, of course, we're always looking at those as well, but I would say are more in the range of $100 million to $300 million kind of size range. Maybe even some that are a little less than that would be the ones that we're looking at today. Again, though, it's hard to say what we're going to get to the finish line. We did about $0.5 billion last year. I would've done more last year if we could have gotten more to the finish line. But we did $0.5 million, which is 4-point some percent of sales. I'd love to do that much again this year. We're going to have to get some moving down the pipe and get them to the finish line here to be able to pull that off. If not, though, like I said before, if not, we'll figure out what else to do with the allocating capital elsewhere, and we don't want to continue to build up a lot of cash on the balance sheet for the long term. So we'll figure out what to do there.

That's helpful. I guess what I'm wrestling with and maybe my math is just wrong, but it looks to me like you guys have about $2.5 billion of excess liquidity on your balance sheet right now. If I was just to get you back to 30% net debt to cap, I'm coming up with something in that range. And given that you tend to pay somewhere around onetime sales for things, it would appear that you have just way more than you need even for what's in the pipeline. And so I guess I'm just trying to kind of square all of that up and figure out why you would want to wait on other options as you described them?

This is Jon. I think one part of that answer is that, as Don talked about, there are the bigger deals that we continue to look at. And as we look at the smaller deals, we've been able to do in some years 10 or 12 relatively smaller deals in the $50 million to $200 million range. So I think your math is correct in terms of our ability to fund these. And we are looking at this very hard, every quarter, and we take it very seriously in terms of the cash deployment and our need to do something there. But as Don said, our preference is the pipeline, the acquisition pipeline, and we want to make sure that we've got the liquidity to fund all of the ones that are in our pipeline. And of course, you never know what's going to get in, to the very end, but we want to stay prepared for that.

Your next question comes from the line of Mig Dobre from Robert W. Baird. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: So I guess my question is primarily around the cost savings. You detailed the restructuring costs. I'm wondering if you can update us on that a little bit. Obviously, first quarter performance was quite strong. And as it pertains to International, it looks to me like in your margin guidance change, most of the upside is pretty much housed in the first quarter. How do we think about the rest of the year?

Well, I think you're right there, Mig. I mean I think most of the upside is in the first quarter, as we looked out, as I said before in the answer to the top line question. It's the middle of October. We just came out in the middle of August here with our guidance for the year. And what we're trying to explain to everybody here is that this year is starting out just like we thought that it was going to. And our Restructuring Program, as we revamped the entire program here and looked at it program by program, initiative by initiative, for the year is coming in remarkably close to the way that we originally envisioned it here at the end of our Q4. So we feel confident in our top line and in our restructuring going forward. Now as we looked at the guidance then, therefore, for the follow-on portion of the ensuing 3 quarters, we felt comfortable enough with our look that we had put together at the year end to maintain that. We made a few minor changes in a couple of the segments and a couple of the quarters here to account for certain activities. We adjusted the tax rate, as Pam explained earlier, and we adjusted for the JV also. But I would characterize our look at the ensuing 3 quarters as consistent with what exactly Don said, a moderate growth following in line with our orders growth. And our ability to generate cash and operating income here are just about where we thought it would be here at the end of Q1. Our savings for the restructuring program has not changed. It's the same as what we had for the beginning of the year at a total of $0.15 for the year. And our first quarter came in just right where we thought that it would. So, so far, so good. We're very proud and we're continuing and we're determined to get through with this restructuring program and get on with providing value to our shareholders and growing the business. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: Okay, very well. And then my follow-up. Very much appreciate the technology platforms that you guys have put out there. I'm wondering, what sort of growth in, say, motion flow and filtration for the year is embedded in your current outlook? Can you provide that?

Mig, we don't really have it broken out by that. We didn't break it out by that, but we can get back to you on that, okay?

And your next question comes from the line of Eli Lustgarten from Longbow.

I had a question on restructuring for 2015. I mean, $0.06 actually doesn't matter, but $0.47 is material, and it would be Wall Street protocol to always exclude that unless you're going to tell me the $0.47 is an ongoing number for the next several years. And I don't think you're believing to indicate that. Is it expected that restructuring in '15 will be much lower than this year and, therefore, we should exclude it?

Yes, very much so, Eli. And we're trying to be as transparent as we can. So the $0.47 is a onetime event for FY '14. We don't expect that in FY '15.

And that's why people should exclude the number if they want to get an apples-to-apples comparison [ph]. I'd encourage you to go back to normal protocol as opposed to bury it in there. My real question is 2 parts. One, were most of the orders driven by distribution as opposed to OEM across it? And two is all the drop in Industrial International, the restructuring, profitability and the slight drop in Industrial North American mix, or what's causing the slightly -- expected slight decline in profitability in those?

Eli, I'm sorry, Eli. You broke up there a little bit. Could you repeat the question?

A question was, one, is most of the order gain from distribution as opposed to OEM. It would seem that, that would be distribution that drove all your order gains. And the second part of it, is the margin change through the year versus the first quarter, principally restructuring in International and mix in North America?

I think that for North America, the margins, as you know, are at a historical high. And we are cautious on being able to really take a look at increasing our margins there in North America. I think our order growth there is a combination of distribution and our OEM business. It's not one or the other. And so I think that's the way that we're looking at that going forward. Now in terms of the International margins. I think there are obviously numerous reasons for the increase in our forecast there. But 2 of the biggest ones are our ability to integrate the acquisitions that we have done in the prior couple of years and that ongoing benefit that we're getting there. And then of course, per our guidance for FY '14, we are continuing to focus on our operations there and trying to -- as Pam said, 95% of our restructuring being there, what we're trying to do is to make sure that we are getting the entire company up to the level where we can maintain, for an entire year, our 15% ROS targets that Don talked about last quarter. And so we're seeing some improvement in our international margins, and we're very pleased by that, and so our updated guidance is just reflecting that marginally.

Our next question comes from the line of Joseph Ritchie from Goldman Sachs & Co.

So just clarification on the $0.32 versus the $0.47. Is the $0.15 in benefit that we discussed last quarter not happening in FY '14? And subsequently, is the run rate for next year it's still expected to be $80 million in savings?

No, that's exactly right. We still are expecting $80 million, and it's moving along just as we thought it would. So the $0.15 is exactly what we reported last quarter. And I think if you look at it by quarter, it's coming in line with what we said.

Okay, great. That's helpful. And then I guess just one question on Industrial International. The margins were great this quarter. It seems like prior restructuring actions have helped. I take a look at your margin guidance for this year at 11.4% to 11.8%, it seems a bit conservative to me if you assume that the benefits come through, through the remainder of the year. Even if you have additional restructuring costs, it seems like the top end of that range is pretty conservative. So maybe you can just discuss that a little bit.

Well, I think that from our viewpoint there, we understand always for the company in all segments, almost, our Q2 is seasonally lower than our Q1. So we will see that impact here for this fiscal year. Our Q3 and our Q4, as I tried to explain earlier, is intact with how we explained our guidance coming out here for the fiscal year. And so since we're only 2 months in, we feel comfortable. Our order rates are coming in where we thought they were. Our end markets are, like always, moving up and down slightly, and we continue to tweak how we are projecting our revenue through the changes in the end markets, not only internationally, but also as well as North America. And so we feel like our numbers that we came in with here for the second half, especially in International Industrial, are good numbers for us to be able to project our future EPS.

Because the implication, I guess, is for the next several quarters that Industrial International is going to be down. Margins are going to be down over the next 3 quarters despite fairly easy comps. So is that the right way to think about it?

I think again, getting to the question, we see again we're looking at these numbers with our restructuring in them. And if I took out the restructuring out of the international margins, they would not be going down. They would be relatively flat to trending up slightly. But the bulk of our restructuring is in the second half, not the first half. So if you're looking at it including the restructuring, then it may appear to be that way to you, but that's not what the underlying trend is in the business going forward.

Your next question comes from the line of Josh Pokrzywinski from MKM Partners.

Pam, if I remember right from the last quarter, you gave a little bit of help on the first quarter, just saying $1.40 midpoint. Any help you can provide on the December quarter, particularly with all the moving parts coming through?

Sure. I can do that because it's very difficult, I know, for you to see with the JV in there. But I would say that the midpoint -- I could tell you the midpoint and then you can wrap the $0.15 around it, if that'll be helpful. But if you exclude the JV, it's probably around $1.14, $1.15. Somewhere in there.

Okay, that's helpful. I appreciate that. And then, Don, just one last one here, going back to some of the comments you made on the PMI earlier, particularly in North America. I think we get pretty consistent feedback that it doesn't feel like a 55-plus PMI environment. Is that the sense you get from your customers? And if so, when do you think we start to catch up to that on a more realtime basis?

That's a good question because I've seen that stated before. I forgot where, what I was reading, I saw some comments to that effect. And I would have a tendency to agree that usually when you're up into that 56 territory, which is where the U.S. PMI is now, that you would expect to see more activity. I think there's a little bit of a lag this time. But when we look at our 3/12 data, which is our more recent 3 months order trends, they're tending to trend in the direction of that PMI where you expect them to be. So I think that's just a little bit of a lag here, maybe a month or 2. And I think we're going to be caught up with it. That's just really off the top. That's my gut feel based on looking at our order trends and the current PMI trends that we're looking at.

Got you. So we should start to see that show up in the December quarter, excluding normal holiday shutdowns and things about that?

Exactly, yes. I think that would be accurate, yes.

Josh, just for clarification, on the numbers that I just threw out to you, I want to make sure that you know that, that includes the restructuring for the second quarter.

The next question comes from the line of Jamie Sullivan with RBC.

Jamie, I would just like to announce that this will be the last question. We'll close it off after this, and Don will have a few closing comments. Thank you. Go ahead, please.

So just revisiting the revenue guidance, it sounds like first quarter is at least in line with expectations. The order trends are positive. In the Industrial segments, you did take a point off of the top end of the range of the revenue growth. I know that may be minor, but just given the commentary and sort of the trends, just wondering why change the range at all at this point in the year? Are there maybe some end markets that are recovering a bit more slowly than you expected? Just if you can give a little bit more color.

I think that the way that we were looking at the guidance at the beginning of the year, when we put it together, we showed certain -- as the year went on, certain end markets improving as the year went on. And as we look at updating all of these numbers, like we do every month, and of course on detail every quarter, we saw some of the end markets, maybe not coming back quite as strongly, and I pushed it down in the second half slightly. As Don talked about at the beginning, some of the markets that are down, primarily the construction equipment market, is not coming back quite as quickly as we thought, primarily in our international margins. And so we wanted to account for that as well as a few other markets that weren't really quite as strong as we thought that they were going to be, as we look out now for the next 9 months. Having said that, there's other markets that are doing better than we have projected. And when we rolled them all together, we ended up deciding to just pull that down by 1 point.

That's very helpful. And then sorry if you covered this on the Aerospace side, but just the log again from the change last time to this time. Did defense have any impact on those numbers?

I think that there's a, from a top line standpoint, there is an impact of some defense orders. But this is more timing than it is a significant downshift. So we think that there is some impact there. There's also a 1 or 2 commercial programs where they are also a timing issue, where they're moving from FY '14 to FY '15. And then the other, of course, the other major factor there is that there's, going forward on an annual basis, $200 million less in revenue that we will see in the Aerospace segment as a result of the closing of the JV as of October 1.

So at this time, Don, we'll turn it over to Don who has some closing comments. Prior to that, I'd just like to say thank all of you for your attendance. And Todd and I will obviously be around this afternoon, and I'm sure we'll be talking to most of you.

Thanks, Pam. And just a couple of comments real quickly here. Just want to once again thank everybody on the call for their participation and for joining us this morning. Just I guess 2 key takeaways to recap. There's more takeaways than that, but just maybe a couple of key ones. Just one thing is our expectations for the balance of the fiscal year is for a moderate improvement in our global markets, and more importantly, ongoing growth in our distribution business. And that was suppressed in the past quarters, and now we see that coming back to life and that's good for Parker, for our future, because it represents half of our -- approximately half of our Industrial business. So that's a real key one that I think is part of the takeaway we should all be pretty happy with. The other thing is that we do expect to complete the comprehensive restructuring that we talked about. We went into a lot of detail with you about that. There's a lot happening behind the scenes. When you talk about capital deployment and all that, this is one of the major things we're doing this year in that area, spending $100 million on this major restructuring is not a typical program for the company, as we mentioned. So we do plan to complete that. As we've outlined it for you and with the full benefit occurring in fiscal '15. So that's going to be a positive as well. And then as always, I'd like to just take the opportunity to thank our employees for their continued commitment and success that we've had. Our global team really does continue to do a great job executing on the WIN strategy and delivering the positive results that we've seen, so I want to thank all of them. And then just lastly, as Pam indicated, she will be here with Todd the balance of the day if there's any questions or follow-up that's needed. So with that, goodbye and have a great day.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.