Good day, ladies and gentlemen, and welcome to the Quarter 2 of the Fiscal Year 2014 Parker Hannifin Earnings Conference Call. My name is Matthew, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. And now I would like to turn the call over to Pamela Huggins, Vice President and Treasurer. Please proceed, ma'am.

Thank you, Matthew. Good morning, everyone, this is Pam speaking. I'd like to welcome you to Parker Hannifin's Second Quarter Fiscal Year 2014 Earnings Release Teleconference. Joining me today is the 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 can follow today's presentation with the PowerPoint slides that have 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, at that same site, 1 year after today's call. At this time, I'll reference Slide #2 in the slide deck, if you have it before you. And it's the Safe Harbor disclosure statement, addressing forward-looking statements. Please take note of this statement in its entirety if you haven't already done so. Moving to Slide #3. This slide, as required, indicates that in cases where non-GAAP numbers have been used, they've been reconciled to the appropriate GAAP numbers and are posted on Parker's website, again at phstock.com. Slide #4 is the agenda for today, it consists of 4 parts. First, Don Washkewicz, Chairman, Chief Executive Officer and President. He'll provide highlights for the quarter. Second, I'll provide a review, including key performance measures for the quarter, concluding with the updated 2014 guidance. The third part of the call will consist of a standard Q&A session. And the fourth part of the call today, Don will close with some final comments. So at this time, I'll turn it over to Don, and ask that you refer to Slide #5, titled Highlights Second Quarter Fiscal Year 2014.

Thanks, Pam. And welcome to everyone on the call. We appreciate your participation today. I'll make a few comments and then Pam is going to return for a little bit more detailed review of the quarter. To start off, I am certainly very pleased that we continue to execute well through the first half of our fiscal year and delivered another strong quarter operationally that was ahead of expectations. Just some highlights for the quarter. We exceeded our guidance of $1.14 for the quarter by $0.10. And just to remind everybody that our second quarter is the worst quarter in our fiscal year. That's just not this year, that's every year. So the holidays, the vacation days, the plant shutdowns and all the related things make that quarter a very, very challenging quarter and to be able to exceed our number, which we thought was bullish at the time by $0.10, we were ecstatic about that. So very pleased with that. Even though the Street was considerably higher than our guidance, we exceeded the First Call estimates by -- as well by $0.01. Now I was reading some of the early reports this morning. It looks like we either -- we're ahead by $0.01 or down by $0.03. So it depends, I think, on what service you're looking at, but we traditionally look at the First Call. They seem to have a pretty comprehensive report and pretty consistent. So -- anyway, pretty good numbers all in all, given that it was the weakest quarter traditionally in our fiscal year. Sales for the quarter were up 1.3%. The organic growth was 3.1%, which excludes the effect of the acquisitions, currency and previously announced joint venture agreement with GE Aviation, so nice growth. We'd love to see more, but it's heading at…

Okay. Thanks, Don. As Don said, I'm going to give you a little more detail, I apologize for any duplication, but we think it's important to walk through the slides. So starting with Slide #6, and I'll begin by addressing our earnings per share for the quarter. Fully diluted earnings per share for the quarter came in at $1.66 and this compares to $1.19 for the same quarter last year, which is an increase of 39%. This 39%, however, includes the previously announced joint venture gain of $413 million or earnings per share of $1.68 recorded in the second quarter. And the second quarter asset write-downs of $192 million or $1.28 of earnings per share. If you exclude these 2 nonrecurring items, diluted earnings per share is $1.24, and this compares to $1.19 last year or an increase of 4%. The increase, however, is 8% if you exclude the restructuring in addition to the nonrecurring items. As Don mentioned, restructuring was $0.07 in the second quarter of this year, and restructuring was only $0.02 in the second quarter of last year. So moving to the next slide, #7, this slide lays out the significant components of the walk, from the $1.19 last year to the $1.66 reported for the second quarter of this year. You can see that the previously announced JV gain of $1.68 is partially offset by the asset write-down of $1.26. And these were both recorded in this quarter. And also on this slide, you can see that there's an additional $0.05 coming from better operating performance in North America and International. Moving to Slide #8, if you focus on the far right, you can see -- this is an adjusted number, sales increased 3% for the quarter versus the same quarter last year. And as shown…

[Operator Instructions] And your first question comes from the line of Jeff Hammond of KeyBanc Capital Markets.

Can you just give a little more color on the aero margins, which continue to disappoint. And then it looks like if you back into the guide, a big snap back there. What gives you the confidence the margins snap back there?

Well, Jeff, this is Jon. And we are continuing with the pattern that we saw last year, with the development programs and supporting them in Q2. As Don mentioned in his comments, we saw a mix issue that was more pronounced that we see in prior periods with the commercial aftermarket revenues just not meeting up with the expectations that we were looking for here for Q2. We know -- it's a long cycle business. We know what to expect here in the second half. We have a very detailed review that we go through each quarter. And we feel good about the OEM revenues and our margins, and we feel very good about the MRO business snapping back here in the second quarter. That's what's going to help drive the margins. And then our continued progress on the development programs is, although it's not apparent because we don't break it out by element, our continued progress on the development programs is better this year than last year. And we are expecting it to be better next year than this year. Long-cycle business, it's hard to change big trends in 1 quarter, but I appreciate your question and wanted to make sure that I gave you a complete answer there.

But are you seeing a big acceleration in the aftermarket that would lead to better mix?

Right now, our projections is that the aftermarket is going to accelerate in the second half. Q2 is always very tough to make a projection off of because historically, over time, always in Q2, the commercial aftermarket is lower than it is in any other part of the fiscal year, and that impacted us this quarter. We actually did a little bit better than our indicative guidance in Q2, although admittedly, at very low levels. So we have a very detailed understanding of where the aftermarket is, where the customers are and what the demand should be. And that's how we are projecting our second half, Jeff.

Your next question comes from the line of Ann Duignan of JPMorgan. Ann P. Duignan - JP Morgan Chase & Co, Research Division: Maybe, Don, since we're going to limit the questions to 1, and maybe a tiny follow-up. Maybe you could give us your normal regional color and some market color on your 3-month and 12-month moving averages?

Okay. Ann, I'll be happy to do that. Well, just keep in mind as I go through some of this that, again, we keep repeating this, but it's worth repeating that December is normally the quarter, second quarter, I should say, not just December. December is our worst month, but the quarter is typically our worst quarter as well. Just a little overview of the PMI, as I went through these the other day, I was kind of making a few notes on the PMIs. All the major indices now, PMIs have improved from September. So if we look at the September quarter compared to the December quarter, they've all improved. All of the major indices are greater than 50%, which is good news. The largest increases were in Germany and the Eurozone, and I'll just kind of tell you what some of those are for those that might not know these numbers. Globally, the number was 53.3%, that was up 1.5% from September. The U.S. had the largest absolute number as far as PMI. It was 57%. That was up 0.8%. Not up as much as the others, but as an absolute number, it was the highest. The Eurozone at 52.7%, was up 1.6% from the prior quarter. Germany was 54.3%. This was a big one. They were up 3.2%, which is a good sign for Europe because Germany has a very heavy weight in Europe as far as country and activity level. So that's a real positive. China, up 0.3%. It's at 50.5%, and Brazil, at 50.5%, was up just slightly at 0.6%. So the smallest increase was China, the largest was the U.S. at 57%. Doesn't mean nothing is happening in China. I think the big issue there is that construction -- the construction markets are flat…

Well, Ann, our guidance is really a roll-up. You hear us say this all of the time, so this isn't anything new to you. But our roll-up is a combination of all of our divisions. And when we get to rolling, we don't want to start playing with the numbers, because it's kind of hard to hold them accountable for the numbers if you start moving them around. So while things are positive, we felt that it was prudent to stay where we're at right now, keep the guidance consistent with what we gave to you last quarter. So this is what we got from our different divisions, and we feel pretty comfortable. There is not that much of a difference, I think, in the revenue, I think most of these things are tweaks. I think when you really look at the previous guidance versus the guidance today, yes, there are some things that moved up, there are some things that moved down a little bit. But they're really tweaks for the most part. The midpoint of the guidance is exactly the same. So, and plus, we give a range. So I think you have to look at the range. You can't just look at the midpoint. Yes, it could move from -- a little bit, but that's why we give a range.

Your next question comes from the line of Jamie Cook of Crédit Suisse. Jamie L. Cook - Crédit Suisse AG, Research Division: I guess 2 questions. Don, I appreciate your color that you provided to Ann, but can you just talk about how the orders trended throughout the quarter, I guess my concern -- or what we've heard from some channel checks in other OEs that December wasn't particularly very strong in some mobile markets, where bonus depreciation is going away. So I'm wondering if you saw that in your order trends and if you can comment on what you're seeing in January. And then I guess just my follow-up question, if you can give us an update on what you're going to do with the balance sheet. We're now entering the third quarter, the repurchase. There hasn't really been any much done there, and just sort of can we -- are acquisitions still a priority in the absence of not doing a more material one in the back half of the year, how we think about share repurchase?

Yes. I think, Jamie, and I'll let Pam and maybe Jon as a little follow-up here, too. But generally speaking, through the quarter, what we saw was a gradual increase in orders throughout that period. So yes, things got gradually better. Again, these are not huge swings one way or the other, but a gradual improvement on through the quarter. And I'll let Pam, if you want to give them more specifics or Jon.

Well, I think just as Don was saying, as we improved -- we did improve through the quarter, so this would confirm some of the anecdotal information that you are also getting, Jamie. In particular in our Asia region, we saw very good sequential growth in orders throughout the quarter. North America, just slightly improving, and in Europe, also improving. But the standout in terms of regions for orders for us was all of Asia.

And Jamie, and I'll give you a longer answer than maybe you want, but I'll just try to cover all this at one time as far as capital allocation, just to kind of recap for everybody, kind of where our head's at here on this. Our first priority is always dividends, and with our track record of 57 years increasing dividends, we want continue that. We've increased that 114% in the last 5 years. The thing that we did last year was we had a 10% increase. We're trying to move the payout as I indicated before, it used to be a 25% target, we're trying to move that up to 30%. My projection for you is that this fiscal year, we're going to move that north of 27%, where we finished last year as far as the payout. And that could happen as soon as this month. I have to get approval from the board. We're going to be discussing this, and we could see a dividend movement as early as this month. But again, they have to weigh in and vote on that. So that's the dividend. That's our #1 priority. You won't see me change this on my watch. We're going to continue this trend. CapEx, 2.5%, we've said that before. It's been running that and we're very comfortable with that. Acquisitions, yes. We still have a target, internal target here of 4% to 5% we'd like to do in acquisitions. We are in all different stages of discussions with a number of different acquisitions all over the world. And our anticipation is yes, we'd still like to get something to the finish line here by the end of the fiscal. Whether we do or not, I can't promise you. But we don't want to leave a…

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

My first question is on what you said about Asia. And you said the greatest sequential order growth was in all of Asia. Now that includes China, is that true in China, as well as the rest of Asia? Or are there differences?

Well, I think China -- if you look at the PMI for China, I think would be the first place to look. It went up the slightest. But keep in mind that, that is the general overall average of everyone's feelings about China. I think when you get to specific markets, you'll find that there's a great diversity of things being up versus things being down. As I said before, the construction piece of that has really been a drag. So there is -- there are other good segments that are -- that can pull that up and have been pulling it up. So when we look at our business in Asia, we're north of 100%. That means that on our 3/12 basis, we expect the year to be better than the prior year, we're almost at 110% actually for Asia in total. That includes, like you said Alex, India, Australia, China and Korea and Japan and so forth. And Japan has been a positive trend for us of late as well. So yes, certain segments are down, but overall, I think Asia is coming back nicely. Gradually, but nicely for us.

Okay. Do you think that China has still got as much potential as you did when you made your investments there or greater?

Yes. I think it's got as much or greater. I think -- we can't write them off. I mean, this country is going to grow. They've got the engine moving. Yes, they're -- they have to slow down and take a little pause, I think, once in a while, and I think that's what they're doing. But the activity levels are still high there. I think that what we saw, Alex, as far as 13% growth rates in the past, it's probably going to be more like 5%, okay? I think they talk about 7% or 8%. I think probably 5% or -- between 5% and 7% probably is going to be more normal, what we see going forward. So we don't anticipate 13% rates. But we still anticipate a level of growth of that's going to be higher than probably most of the other regions around the world.

Yes, absolutely. I don't see anything wrong with 5% to 7%.

Yes.

Now second question is this, you mentioned that your internal guidance was $1.14.

Right.

And yet, there were estimates much higher than that, some as high as $1.35.

Right, right. [indiscernible] That ruined my Christmas, by the way, when I saw those numbers.

Well, they had been out for a while.

Yes.

The thing is, those expectations were very high and people expected you to raise your guidance for the year and that was a widespread expectation. So that's why I think the stock is off today. You don't have the kind of volatility in your stock price, so I'm wondering why you didn't guide the Street down during the quarter, so that you wouldn't get a negative surprise in the way we did in the guidance?

Yes, I don't know why we got a negative surprise in the guidance. The bottom line was we had been talking for the first 2 quarters about the second quarter being in the worst quarter in our year. We do this every year. We make that known out there and then yet we still get estimates that are way, way higher than us for the second quarter, and I don't understand. And I think we probably need to do a better job offline just explaining to everybody that, hey, the second quarter is -- don't get ahead of us here. And the other thing for the year, like we said before, we are -- we'll adjust the numbers and the range and all that as we go forward. And typically, what we've done this year is basically what we've done in the past years is that, we'll narrow the range as we get closer to the end. It doesn't -- it's not -- it doesn't make any sense to keep a wide range as you're getting closer to the end of the fiscal. But I didn't look at this as drop in the range or missing anything. I think we're right on target. We feel that we're right on target. Yes, we narrowed it. We reduced the top, but, hey, we raised the bottom. So I mean, look, you can't look at half of it. It's like a cup half full or half empty. I think you've got to look at both ends of the range. One end went up and the other one went down and the midpoint is the same. We look at that as consistent and if things develop as we hope they will, a little better based on all the things I've just told you in the third quarter, you'll see us move the range accordingly. We'll make the adjustments as needed.

Yes, you went up $0.10 up and $0.10 down on the...

Your next question comes from the line of Andy Casey of Wells Fargo Securities.

I just wanted to return to the capital allocation discussion and really appreciate that you largely answered the question already. But could you help us understand kind of the sort of milestones we should look for, given it seems like you're trying to balance 2 things against what appears to be a building industrial recovery. Those would be potential acquisition investments and then a more rapid capital redeployment. So I'm just wondering if you could kind of help us understand timing or milestones?

Well, I think when we talk about the acquisitions and the capital redeployment, I think that, to us, it's not a rebalancing. It's really trying to put the money where we really want to put it, and that is growing the business, okay? I want -- I'm -- I always default to trying to grow the business. I think at the end of the day, we've got to keep the top line going up. We've got to keep the operating earnings going up. So I'm not going to buy back a lot of shares if there's any hope at all that we can grow the top line faster by deploying those dollars in a different fashion, and specifically to make some good, strategic acquisitions for us. Having said that, though, I also am aware that it's not good to keep a lot of money on the balance sheet just sitting there, especially in this kind of environment. And we will -- if it looks like we can't adequately deploy a significant amount of those dollars that are sitting there, then we will take other actions. I guess that would be the best way to put it. So I don't think that's inconsistent with what I've said in the past. I think maybe I may have been a little bit more explicit about that, but it's not inconsistent with the way I'm thinking.

Okay, Don. And then if I could sneak in a restructuring. And it looked a little lighter than we expected in Q2, but the gross restructuring for the full year, really, the guidance didn't change. So a little bit of shift out of Q2 into the second half, could you comment on -- is this just timing of projects? And then is there any change in the fiscal 2014 view for the $0.15 restructuring benefit that you guys previously communicated?

Yes, Andy. Jon here. Yes, I think as you've touched upon it here, this is as we explained in August, this is a series of many, many projects. And some of the projects, some of the very big ones have moved from Q2 to Q3. And with our best intentions, as we laid out our sequence of events on the restructuring, as the complexities of accomplishing all of our goals for all of the projects came to light through the quarter here, we knew that we had to move it. We are still expecting $0.47 gross for the year, our $6.40 includes the savings that we're going to get from those. Obviously, those savings are moving out to the right a little bit, but we are maintaining our guidance at the $6.40 here to include a few cents less in savings that we had anticipated at the beginning of the year in August when we tried to describe the restructuring to you at that time. Please, keep in mind for us, this is a very, very big program for us by a factor of 4 or 5 than we've ever done before in 1 year. And we're really pleased with our progress, but it's just -- we're moving from 1 quarter to another at this point. And that's what's included in our guidance.

Your next question comes from the line of David Raso of ISI Group.

So the quarter on the restructuring, you had about $0.06 of EPS help by the restructuring moving to the right. I know you're not going to give us fiscal '15 guidance right now, but if you get the full $0.47 restructuring done this year, is that all the actions that are planned? I just want to make sure we understand. Is this generally supposed to be done by the end of this fiscal year?

David, yes.

And also the projects you're looking into.

Yes, David. Although we've slipped from 1 quarter to another, we have full commitment from our team that we're going to get this done in FY '14. That was our goal at the beginning of the year. That's still our commitment to ourselves and to our board, as well as everybody. And we have the project plans detailed out, to enable us to get there. So as I say, we're not taking this lightly. We understand the complexity of what we're trying to do in all of these projects, and we are determined to get all of the restructuring done in FY '14.

And the tax rate, x the onetime items to be consistent with the guidance, x the impairment, x GE, Aero, what is a tax rate guidance now?

29%. 29%, David.

Okay. And lastly, on the order growth. I mean, given everything you spoke of last quarter, you highlighted all the PMI data, I would argue most folks are probably looking for order growth rates to accelerate and they basically held steady. Can you characterize what your expectations were on order growth for the quarter and what you actually received?

Well, I think the one point to make on the order growth is that what is accelerating and by virtue of the data that we provided is our growth in international rest-of-world. Europe, as well as we were explaining to Jamie, it also accelerated within the quarter. So it's our International Industrial segment that is really driving that. That 5% overall growth includes a move from 5% to 6% in International. And North America was up at -- remained at 3% growth rate. So in general, as you well know, we will see a lag, and we are expecting continued order growth as time goes forward here. The one point to make, David, that this may be helpful to you is just, as Don talked about, so pleased with our progress on distribution and we are really and historically, we'll see that continue on. It's just such a powerful part of our cost structure and our sales -- ability to generate sales each quarter. In our guidance going forward, we -- as we looked at our entire OEM base, although the OEM progress for all of North America, as well as internationally, was good during the quarter, we did not want to move our sales guidance up for the full year until we got another quarter under our belt. And so that's why Don and Pam were trying to explain here that we'll give you a better update here after our Q3.

Well, that was -- it was interesting, the North American margins, you lowered them in the guidance, but your mix, all right, more distribution. I'm surprised you took them down. Is there something else to consider there, why the margin guidance came down despite distribution is the highlight?

Yes, we were really very careful about looking at those North American margins. And my advice at this point, would be to don't overreact to that. We are not trying to signal anything. We were taking a roll-up of all of the businesses here for the second half and we'll see over time those margins come back up. So no, we're not seeing any shift in the OEM margins long-term at all here. We were just trying to be more precise for the year and try to give you our best information at this point in time.

And just to add on to that, David. We do see that North America is going to be considerably ahead of last year even with that small tweak. So Jon said it absolutely the best way that you could.

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

So a follow-up on the restructuring question, given some of the moving pieces on timing here, how does that affect or does it affect the savings calendar for next year, i.e., do you capture all of that in '15 or does some of that start to leak out into '16?

No, we are still going to capture '15 to remain intact. So we are not going to see a bleed-over in the restructuring into '15 and certainly, we're going to have the savings that we projected for '15 in our projections, once we come out with '15. As Don has articulated, we are very focused on this restructuring program that is going to allow us to get 15% in '15. And that's the purpose of -- in part of trying to make sure that everything that we do in '14 is a major #1 focus for us to get that restructuring done and get it completed here in Q3 and in Q4.

Got you. That's helpful. And then if I could just sneak in one last question for Don, Don you mentioned an appetite to revisit buyback at some greater magnitude if the M&A pipeline doesn't fill up. Are you comfortable putting a number around where the balance sheet should be from debt to cap, debt to EBITDA, however you guys want to think about it, where you would be willing to take the balance sheet, just on buyback?

Well, just traditionally and it really hasn't changed. When we look at our leverage on the balance sheet, if I just talk about leverage for a second. We don't want to do anything that would jeopardize our A rating on our debt. We've had that for as long as I've been at the company, 40-some years. And we don't want to jeopardize that, so all the 3 rating agencies have us A-rated on our debt. And so why I say that, then we could take our leverage up to probably 37% comfortably. I mean we've even -- we've been there before. We could maybe even go slightly above that, but we would do that in conjunction with discussions with the rating agencies if need be. So that's the first thing we do. We just say hey, we're just not going to jeopardize that. Yes, we could drop our debt rating and go to higher levels, but we're not going to do it.

Got you. And that's on a gross basis?

Yes.

Or net basis? Okay. Gross.

Gross.

Your next question is from the line of Nathan Jones, Stifel. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: I wondered if I could just follow-up on a question that David asked earlier, specifically on North American orders, which is where I thought we might see some accelerating growth. Don, you've been talking about the PMIs, the new order PMI number is above 60. Would it have been your expectation that we would have seen that manifest in some stronger demand by now?

I didn't see 60, Nathan. I saw 57 -- Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: The new order portion of it, which is the...

Oh, the new order portion. I see what you're saying. I see what you're saying. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: I'm just wondering, Don, if in your experience, you would have expected to see these kinds of forward indicators manifesting in better order growth for you at this point?

There's always usually a lag, okay? So the question is, how much of a lag? And I, frankly, I haven't gotten in to try to decipher that at all. But I think it will manifest into improvements over time. The question is, when is it going to all hit? I'm seeing it on the distribution side already. I'm seeing exactly what I would call -- but remember, distribution is more real time. They order because we've got this thing leaned out pretty good. What they need this month, they're ordering this month. So I'm seeing those orders. It's the OEM side that gets to be a little -- our ability to predict is a little bit less on the OEM side than it would be on the distribution side. So I think it's going to develop. I think it has developed on distribution and it will follow on the rest of the business, especially to OEMs in time. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And my follow-up, I think if I do the math, the incrementals in Industrial International were about 40% if I take out the restructuring charges. Is that kind of an incremental level we should be looking for you to hold for the next few quarters coming off these low levels of demand?

Well, we had -- for the company, we -- overall, we did 30%, okay? And that's made up of -- Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: I'm just talking specifically about Europe.

You're talking about Europe. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: Or International.

Yes, I think for International, David, at the very beginning, of course, long-term our target is 30% at the very beginning of the uptick, which we are starting to see right now quite often. And normally, this is barring restructuring. We'll see MROS greater, much greater than 30% and we've done 40s in the International Industrial business going forward here also. So, and this would also include, of course, the savings that we're going to get from our restructuring that we're working on here, which is primarily in our international sector, although it's -- there is restructuring happening throughout the world for us. So I think 40% is not out of range. We wouldn't want to commit to that for a very long period of time and I would not disagree with your math that you're doing here in Q2.

The next question comes from the line of Joe Ritchie of Goldman Sachs.

So perhaps I'm the only one, but I thought your order number was good this quarter, particularly given the tougher comps. What I am surprised by a little bit is that you maintained your revenue guidance. You actually took Industrial International down slightly at the midpoint. And then going back to the margin piece, given the improving volumes, are you just seeing worse mix than you originally anticipated? Was pricing worse on the order side? I'm just trying to really understand why margins came down, specifically on Industrial North America.

I think that for industrial North America, the margins on -- we are not trying to signal to anybody anything about North America margins. Our North America margins in our industrial sector are very high for us. They are at a high rate for FY '14. They're projected to be higher in FY '14 than in FY '13. When we get to this range of margins in North America, we start to get into territory that we have not been living in. We are so proud of the way that we've been able to execute on the win strategy and really penetrate markets that are with new products that are just doing very, very well for us and well above our expectations. But our margins in North America are just very high and -- but we hesitate to continue to project for our guidance margins that are higher than we've ever seen before in general.

This is Pam speaking. One of the things to keep in mind is that we have $0.20 in the third quarter with restructuring. And as you know, when you're doing this type of restructuring, which is the biggest restructuring that we've ever done in this company, there's noise associated with that. Our forecast is a bottoms-up forecast. It's only natural that people are going to be somewhat cautious when they have the biggest amount of restructuring. And even though restructuring is mostly in International, there is a portion of that restructuring that's taking place in North America that is going to fall mostly in the third quarter. So we're not signaling [ph] that there's anything -- a problem with North America in anyway. We think that North America is going to be a good year. It's going to be ahead of last year significantly, and that is a very tweak in terms of what really came down in North America. That's why we give a range. We didn't feel that it was prudent to increase it to what it was last quarter, when we give you a range anyway. So we left it where it was because that's what we received from our operating group. So I wouldn't be overly concerned with that. I -- that's really not a problem or it's not a concern that I have.

Okay, that's helpful color. I guess just segueing on a follow-up question on the restructuring. I just want to make sure I'm clear. It's going to be a $0.20 charge in the third quarter, the remainder in the fourth quarter to get you to $0.47. I missed your comments earlier, Jon, are you expecting the benefits to still be $50 million and is that all coming through -- I'm sorry, $30 million and is that all coming through in the fourth quarter?

No, we're not saying exactly what the savings are going to be from that. We are saying that the savings are intact for FY '15. Because we didn't get every bit of the restructuring done when we wanted to get it done, as in the shortfall that we had in Q2 because of the shift to Q3, we're not going to get those savings, but what I am saying is that despite that, we are maintaining our guidance for the year and we will be making it up in other places. And so we are fully committed to our $6.40 for the year.

Got it. So some of it is shifted to 2015 and that amount in 2015, the run rate is still $80 million?

That's right. That is correct. Yes.

Okay. I think at this time, we've reached the end of our hour here. So we'll have to turn it over to Q&A, Matthew, if you're -- we are going to end our Q&A session, excuse me. And we are going to turn it over to Don with some closing comments. Apologies.

Yes. Thanks, Pam. Just a few comments. First of all, I want to thank everyone on the call for joining us this morning. I certainly and I think the rest of the team here, certainly appreciates the thoughtful questions and the dialogue as far as the year. It's a complicated year. There's a lot of moving pieces. I think you can see that and it's, believe me, we spent a lot of time going over all these pieces and try to make sure that we give you the very best picture we can of what's happened and then what's about to happen. And of course, the only thing we can be sure of is that we're never going to be right. We're going to either be too aggressive or not aggressive enough, and we'll probably never hit anything right on the head. But we'll do our best and I certainly appreciate you hanging in there with us. Our current expectation for the balance of this fiscal year is for ongoing moderate improvement. Again, we don't see this huge ramp-up like in other periods, but we didn't see a huge decline in order trends in this period like we have in the past. So you're not going to see the huge transition, but it's going to be a moderate improvement in global markets, which is still going to be a positive for us. And actually, with all this restructuring going on, I'm happy that it's not a huge ramp-up because we'd be trying to do that in the midst of a major restructuring. I think that could have been an issue. So right now, things are moving in the right direction at the right speed. I think it's going to be a good fiscal year for us as we finish it…

Thank you. Ladies and gentlemen, thank you for joining in today's conference. This concludes the presentation. You may now disconnect. Good day.