Good day, ladies and gentlemen, and welcome to the Quarter 3 2014 Parker Hannifin Corp Earnings Conference Call. My name is Carolyn, and I will be your operator for today. [Operator Instructions] As a reminder, the call is being recorded for replay purposes. And now, I would like to turn the call over to Pamela Huggins. Please go ahead.

Thanks, Carolyn. Good morning, everyone. This is Pam Huggins speaking, just as Carolyn said. And I'd like to welcome you to Parker Hannifin's third quarter fiscal year 2014 earnings release teleconference. Joining me today is Chairman, CEO and President, Don Washkewicz; and Executive Vice President and CFO, 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. For those of you who aren't on the line today, the slides will remain posted on the company's investor information website 1 year after today's call. At this time, reference Slide #2 on the slide deck, which is the Safe Harbor disclosure statement, which addresses forward-looking statements. And we ask that you please take note of this statement in its entirety if you haven't already done so. The slide also indicates, as required, that where -- in cases where non-GAAP numbers have been used, they've been reconciled to their appropriate GAAP numbers and are posted on Parker's website as well. Slide #3, moving to the agenda. The agenda today consists of 4 parts. First, Don Washkewicz, Chairman, CEO and President, will provide highlights for the quarter. Second, I'll provide a review, including key performance measures for the quarter, and concluding with the updated fiscal year 2014 guidance. The third part of the call will consist of our standard Q&A session. And for 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 #4, titled Highlighted -- Highlights, Third Quarter Fiscal Year 2014.

Thank you, Pam, and welcome to everyone on the call. We appreciate your participation this morning. We delivered a strong quarter operationally, that was ahead of expectations, and we are on track with our previously announced restructuring initiatives, and we'll talk a little bit more about restructuring a little bit later in the presentation. Restructuring costs were higher than planned, reflecting final agreements with employee works councils, and I believe we talked a little bit about that in the last meeting. Some highlights for the quarter. Sales increased 3%, adjusting for our previously announced joint venture with GE Aviation. As reported, sales increased 2%. The strongest organic sales growth of 5% was in our Diversified Industrial International business. We're very pleased to see a third consecutive quarter of order growth producing a 7% improvement year-over-year. Our order growth trend is giving us increased confidence in the global economy. Total segment operating margins were approximately 13%, but close to 15%, excluding restructuring expenses, and I think, everyone on the call today knows that, that's our target ROS that we've been shooting for. So excluding the restructuring, we've been closer to 15%. We were particularly pleased to see strong operating margin performance in the Diversified Industrial International businesses, where operating margins were just above 9%, but when you exclude restructuring expenses, that approached 14%, so that's extremely strong for that segment of our business. So we're pretty much hitting on all cylinders right now. Earnings per diluted share were $1.88, adjusted for $0.28 per diluted share in restructuring expenses in the quarter. As reported, earnings per diluted share were $1.60. As I said, I'll give you a few comments on our restructuring. We have an incurred now $0.40 year-to-date. Critical steps were completed in the quarter that allows us to move forward…

Thanks, Don. Let's reference Slide #5 now, and I'll begin by addressing earnings per share for the quarter. On the slide to the left, you can see that adjusted fully diluted earnings per share for the third quarter came in at $1.88 versus $1.69 for the same quarter last year, which is an increase of $0.19 or 11%. As you recall, last quarter, we planned to have $0.20 in restructuring, and we came in at $0.28 for the quarter. And this compares to restructuring last year of $0.01. So moving to Slide #6. This chart on Slide #6 lays out the significant components of the WAC from the adjusted earnings per share of $1.69 last year for the third quarter, to the $1.88 for the third quarter of this year. And as you can see from this slide, the significant items are increased segment operating margin due to North America and International, and lower below the line expenses due mainly to pension expense, partially offset by higher tax rate due to the expiration of the R&D credit. So moving to Slide #7. And on the far right, focusing on the adjusted number here, you can see that sales increased almost 3.5% in the quarter versus the same quarter last year. And as shown in the gold box on the left, currency reduced sales by a little less than 1%. So adjusted to realignment cost in the quarter, segment operating margins, detailed at the bottom of the slide, of 14.7% are ahead of last year of 14.1%. Realignment costs in the quarter were $60 million versus realignment cost last year of $2 million. The higher segment operating income this year of $493 million versus $465 million last year, a 6% improvement, and that's due to higher volume in International, a slight…

[Operator Instructions] And it comes from the line of Joe Ritchie from Goldman Sachs. [Technical Difficulties]

Jeffrey Hammond is on. Sorry about that, I'll get Joe back in.

Can you hear me guys?

Hey, Jeff, a question for you, it's Pam speaking, were you able to hear us talking?

Yes. I heard the intro remarks, and we just had a little pause before the Q&A. So maybe just to jump in, can you just talk about any kind of weather impact you saw and if March and April were materially better in North America than January, February?

Okay. Joe, first, Jon here.

It's Jeff.

Oh, Jeff. Okay. Now in terms of weather first. It's really hard for us to quantify the impact. Of course, we're aware of the weather here in the upper Midwest and Northeast, but we're a global company, and it's very hard for us to quantify a number for weather. So we're conscious of it, but we purposely decided not to call that out because we don't see that as a -- certainly not an important factor for our quarter that we just finished. Now the other question that you had, Jeff, I'm sorry. Please repeat it.

No, that's fine. And then, just margins on Aerospace, I think, you tweaked that up in the guidance. They were, in the quarter, a little bit lighter than I was thinking and imply kind of 15%, I think, for the fourth quarter. Can you just talk about the trend there? And how do we start thinking about some of these nonrecurring and R&D cost going away into '15?

Right. We -- showing right now in our updated guidance that the yearly number for R&D trends below 10% to about 9.6%. In the quarter, in our guidance, it implied 8.7% R&D as a percent of sales. And so the trends in Q4 for Aerospace are up in revenues and flattish in actual expenses R&D, but as a percent of sales, trending down for Q4.

The next question we have comes from the line of Joe Ritchie.

So the first question I have, and I did appreciate the color that you gave us on the incremental savings, but I guess, one of the things I wanted to better understand is how do I think about the margin trajectory for '15? I think, historically, you guys have suggested a 15% number for '15, but just based on all the incremental initiatives that you're doing, the restructuring that you're doing, that number just seems way too light to me. So perhaps, you can comment on that?

Yes. Joe, this is Don Washkewicz. Really, right now, let me just describe the process, the forecasting process, we've got about 150 divisions right now that are working on the -- our fiscal '15 plan. And that's a global initiative. So they all roll off in the next month or so to our group presidents, our group levels. And then, those group presentations will be made to the management committee at the company. So really, at this point, it's really premature for us to really give you anything solid. Of course, we're not backing down from what we said before, is that our target is 15%, and we talk a lot about that. So we're not backing down from that. But I can't give you anything more specific. And so I see what the groups are coming in and what then we'll do is we'll aggregate all that and come up with -- we'll present that to the board. Once the board signs off on it, then we'll present it to you at the next meeting and give you a real good -- not only give you the numbers but we'll give you a lot of insight as to how we arrive at the numbers. But we're right in middle of that process. So it'd be kind of premature for me to predict anything at this point. Other than the fact that we're not backing down from what we told you earlier.

Don, that's helpful. I guess, one -- my follow-up question is on capital allocation. You've talked about the propensity to get out in the market and acquire assets that are available. Perhaps, you can just provide a little bit of color on what you're seeing in the marketplace today? And if things don't materialize, do you have higher inclination to perhaps more aggressively buy back shares, just given how strong your balance sheet is?

Yes. Well, as I said, I'm just going to repeat this a little bit, but I've kind of stated this in the past, the first priority, and I've mentioned it in my opening comments, is the dividend, and that's been our first priority, and will continue to be our first. Just to give you a little color on that, we've increased now 58 years in a row, actually increased the dividend. In the last 5 years, it's 92%, roughly, increase in the dividend. What we're trying to get to, this is a repeat as well, we're trying to get to 30% payout. Last year, we finished at 27%, we're at about 28% now, and we're going to gradually move it up and get to the 30% payout level. So that's the dividend. The second thing is CapEx. I'll only comment on CapEx because that's a critical part of our allocation as well, is that we've doubled the size of the company with a CapEx running around 2% to 2.5%, which I think is unheard of in this day and age. And it's really a tribute to the Lean initiatives and the WIN strategy that we're able to do that. So we're in pretty good shape on CapEx. You mentioned acquisitions, that's our next priority would be acquisitions, we have a number of them that we're looking at. We've got some in the pipeline, we've got some expressions of interest out there. I can't predict anything, and I won't predict that if we get them to the finish line or not because you never know until you actually signed the paperwork. So -- but we're still hopeful that we're going to be able to do something in the way of acquisitions. And if we don't, to your second question, yes, we will be looking at, this year, this calendar year, we will be looking at potential share repurchases. We've realized that there's -- we have plenty of capacity. Our first priority is to grow the company and use that capacity to grow the company but if that's not in the near-term cards, we'll utilize capacity to do some share repurchases. So we're not backing down from that. As far as pensions are concerned, I mentioned earlier, I think, we did $75 million this year, we don't anticipate we'll have to do anything else there. So that kind of gives you the total look at what we're looking at as far as capital allocation.

The next question we have comes from the line of Mig Dobre from Robert W. Baird. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: Just clarification on Aerospace really quickly. Did I hear it correct that you expect to exit fiscal '14 with 8.7% R&D as a percentage of sales?

Yes. Discretely for the quarter, Mig, this is Jon. For the year, will be at about 9.6%. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: Okay. Great. And are you still sort of aiming for 8% or the very low-8s, and is that something that's achievable, maybe over, say, the next 12 months?

Well, we don't want to get into guidance too much for FY '15, Mig, but that has been our stated goal, to get it down into the low-8s. We intend to do that. And as Don described, we'll be really pulling it all together here in Q4, and we'll give you a much fuller report, but there's been no change in our intentions there. Mircea Dobre - Robert W. Baird & Co. Incorporated, Research Division: Then my last question real quick is on OE versus distributor demand in the industrial segment, if you could provide any color there?

Yes. Let me just talk a little bit about -- maybe I'll talk about several aspects of what's happening out in the marketplace. A little bit of comment on the PMI index, first of all, which kind of gives you a general look in the different regions around the world just from a high level. Actually, we saw this month, this period, a little bit of a disconnect, not a major disconnect, a little disconnect from our order trends that PMI is actually -- all the PMIs for all the regions actually dropped slightly. Overall, probably not all of that significant, overall globally dropped about 0.6%. But we saw a negative movement on every region with the exception of the Eurozone, which was actually slightly positive. So -- but the good news, having said that, it's not all bad, I mean, these movements happen, and sometimes, we lead, sometimes, we lag. But the good news is that everybody is above 50. Every region is above 50, Germany, Eurozone, U.S., global and so forth, with the exception of China, which is at about 48 right now. So that's the PMI look. When you look at some of the markets, actually, the list is very long on positive markets, okay, for us right now, and fairly short on weaker markets and flat markets. Let me just kind of run down quickly for you. Of course, we participate in a lot of OEM markets, as well as the distribution segment of our business. So some of the strongest markets for us right now -- or segments, I should say, would be distribution, which should be very strong, I'll talk a little bit about the order trends there in distribution in a few minutes. Oil & gas is very strong for us. Cars and…

The next question we have comes from the line of Alex Blanton from Clear Harbor Asset Management.

I wanted to go back to the fourth quarter. I was off a little bit so this might've been asked. But if we look at what's implied in the fourth quarter, you're seeing -- without restructuring, excluding that $1.77 versus $1.88 in the third quarter, and then, if we include the restructuring, the gap is narrower, it's just about flat, $1.62 versus $1.60. Typically, you have a stronger fourth quarter than third. So what is the reason for this implied decline?

Alex, I just want to make sure that we're all clear about the numbers, for the fourth quarter, at the midpoint, we have $2.04 projected, okay? It's higher than what we projected last quarter, but the restructuring that we're projecting is pretty much the same. We said $0.14 last quarter, and now we're saying $0.15 in the fourth quarter. So I just want to make sure that we have the numbers. We -- really, this guidance, when you look at the guidance that we're giving you today, compared to the guidance that we gave you last quarter, really, the only thing that is different is we built in the third quarter beat because we beat our third quarter versus what we said, and we adjusted the international numbers because of the order rates, the consistency in the order rates, and we felt that we got through a lot of the noise that was happening in Europe as a result of the restructuring, so we took the international numbers up. But that's the only difference when you look at previous guidance versus the guidance today.

Okay. Well, I was using the full year of $7.05, that's $6.50 plus $0.55 of restructuring, right?

Well, if you take the $6.50, we had $0.47 in restructuring last year, now we have $0.55, okay? The difference is the restructuring that you saw in the third quarter, which is $0.08 higher.

Well, I know that, but if you take the full year, it's $7.05 without the restructuring, correct?

Well, it's $6.50, plus the restructuring that's included is $0.55.

$7.05. And then, I looked in the -- it's $5.28 without the restructuring for 9 months.

The $6.50 has the restructuring in it. And you're right, $0.55 plus the $6.50 gives you your $7.05.

The next question we have comes from the line of Nathan Jones from Stifel. Nathan Jones - Stifel, Nicolaus & Company, Incorporated, Research Division: Don, if I could just push you a bit more on the balance sheet, the balance sheet is obviously suboptimal at the moment and you're at as low a leverage ratio as far back as my model goes for Parker. You've talked about wanting to do acquisitions, you would need to do some fairly large acquisitions to get the balance sheet back into a more optimal capital structure. Is it safe to assume that you are working on some larger deals and some deals that would be record size for Parker at this point?

Well, we're looking at everything that comes across. I mean, all different sizes. There's no specific size that we're targeting on. So we're looking at a lot of different things. And if whatever we end up getting across the finish line, if we have excess capital and we think it's prudent to do some share repurchase, we'll do some share repurchase with whatever we've got left and bring everything back into kind of the normal range what you typically have seen us do in the past. I won't read anything more than that into this. I think, like I said, we've got some expressions of interest out there. We've got things that have fallen out of the pipeline, we've got other things that are coming into the pipeline. And until we can get something across the finish line, I just can't really give you much more to go on there. I mean -- but, with the exception that -- we hear what you're saying. And Nathan, you're consistent, you've been saying this for a long time now. So you're very consistent, and we appreciate that. And -- but that's kind of what I would say is we would certainly try to do the acquisitions and the balance, if we have a balance left after that, we would do some share repurchase. And that would have to be approved by our board, too. So I can't even give you a hard number on that but we would -- I think, the board would be in agreement with that. Nathan Jones - Stifel, Nicolaus & Company, Incorporated, Research Division: Do you have a targeted timeframe for getting that capital structure back more in line with the historical level that Parker's had?

Yes. I think, what we would say is that we're looking at the calendar year here, we're a few months, or 3 or 4 months into the calendar year now, we're seeing this calendar year, I think, would be the relative -- relevant timeframe that we'd be looking at. Nathan Jones - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. My follow-up question is on inventories, destocking versus restocking. Can you talk about any pockets where you're continuing to see inventory destocking, and with orders starting to firm, if you're starting to see anywhere where there's any inventory restocking?

I don't think that -- with the exception of maybe a couple of segments that are not tracking very strong like right now, which would be not very significant, and overall, I don't see a whole lot of destocking going on right now, I see more of cautious stocking relative to, and maybe in line with normal growth activities right now, pretty much across the board in all those segments I mentioned. I don't see big movements one way or another. No great destocking, nor any great emphasis on restocking above the current demand levels.

The next question we have comes from the line of Jamie Cook from Crédit Suisse. Jamie L. Cook - Crédit Suisse AG, Research Division: Just a clarification and a question, Don, not to delay for the balance sheet question. But now you're saying you're really not going to have an answer on the share repurchase or anything until calendar year 2014, whereas before, I thought, we would hear something by the end of your fiscal year. Are you pushing things out or was I incorrect? And then, my second question is just your confidence level in the ability to achieve 15% margin next year in international industrial, it sounds like, now, the restructuring is ahead of plan. I think the concern was it would be behind. And given the size that Europe is getting better, how should we think about incrementals in that business coming out as we approach next year?

Well, let me just say that I don't know that I've been specific. I think, we've been talking about the year. And so I'm saying calendar year '14, it could happen in fiscal year '14, certainly. We might take some action, but we really don't have another board meeting until after the end of the fiscal year. So chances are we probably wouldn't do a major share repurchase before then. So it's really more like calendar '14. I don't know that I was specific one way or the other. I think, we just said the year within a year in the past. And then, the question on the 15%, I'm going to let Jon handle that. I think, he has some information for you.

I think, Jamie, the trends in international for us in our restructuring for FY '15 certainly indicate to us that we can get there, Pam talked about the restructuring without the restructuring in the slide that she had for the quarter at gain well north of 14. And given that we're boosting up our savings projected for next year with the additional restructuring that we spoke about this morning, we feel good that we're on track to do 15% in '15. So we're optimistic. We don't want to get too far out ahead of ourselves because we want to really get through to make sure that the numbers are footing here in the quarter, and that we really understand precisely the final impact of all the different restructuring initiatives. One of the things that I find myself doing sometimes is minimizing the difficulty that we've gone through in the past 3 quarters getting this restructuring done. It is awfully complex, a very tough work. Our employees in Europe have worked very, very hard to get us to the point that we're at right now. And certainly, all of our employees around the world that have been working on this restructuring program have just done yeoman's work. And so I don't want to really project anything other than what we talked about this morning, which is an additional incremental $60 million in savings for industrial international for FY '15.

The next question we have comes from the line of Ann Duignan from JPMorgan. Ann P. Duignan - JP Morgan Chase & Co, Research Division: Don, can you just give us some color, I'm struggling with your comments on the process industry. I think, the process industry produce natural gas, and will be benefiting and maybe thriving in this environment. Could you give me some more color on what exactly you're seeing in process industries and what process industries are we talking about?

Yes. I think, for the most part, what I would be referring to, it would be chemical process probably would be dominant within what I've been referring to here.

So yes, you're right, there's some petroleum refineries and things like that probably would still be doing okay. Chemical process, I think, is more what I'm referring to here. And semiconductor, I mentioned earlier, as a separate item. Ann P. Duignan - JP Morgan Chase & Co, Research Division: And the semiconductor is pretty consistent, but the process just being inconsistent. And then...

It depends on who lumps what into that bucket. I think, it's going to maybe make a difference for you. Ann P. Duignan - JP Morgan Chase & Co, Research Division: Yes. Got you. And then, on the acquisitions front, it struck me last night, I saw that Stanadyne sold its filtration business to CLARCOR, that was about $100 million business. I might've thought that, that would've been exactly in Parker-Hannifin's sweet spot, filtration, maybe a little vehicle-related, but is that still the kind of business that Parker might be looking at? And what are you seeing on the competitive front as their own pricing, when deals are coming to fruition?

Ann, the filtration business for us is a great business for us. And that business that you were talking about didn't fit into that category. We are in the process of looking at all filtration companies. Please keep in mind that we are looking at every deal possible. And when we look at every deal possible, we are focusing in on synergies that we can get and what we can deliver to our shareholders at the end of the day. And that's how we do our evaluations. And without commenting on that specific deal, we feel very good about our process. And as Don talked about, we've got several businesses in our pipeline in general. And we will always be sure to emphasize the filtration business. Don, you want to add something to that?

Yes. And I think, Ann, you had asked about the pricing as what's happening on pricing. Generally, I think, what we're saying, and it's been typical here of late, is that people are looking in the rearview mirror and saying, "What kind of a multiples businesses have gone for prior to 2009, prior to the big recession?" And I think, that's still in their memory banks. And I think, they still feel that even going into a much slower growth period that we're looking at now that they still think that the properties command much higher multiples than what we would normally think that we could justify based on a discounted cash flow. So I think, that's kind of where we're at now with probably a lot of other companies. We're looking at a future with growth rates that are not going to be bad, but they're not going to be as great as they were back prior to the big recession, at least not in the near-term. And so, the valuations we think are a little bit more pricey than they have been in the past. And I think, people need to forget a little bit about -- or maybe need not forget, but need to make an apples-to-apples comparison of what's going on in the past and what's going on now because we know that only -- there's only 2 lines on this kind of cash flow that make a difference, it's the sales growth line and operating margin. And with the sales growth being down a little bit from what it was in the past, I think, the multiple should come down with that. Ann P. Duignan - JP Morgan Chase & Co, Research Division: Yes. I guess, if I were the seller, Don, I would argue that maybe we don't have the big peaks and troughs we've had historically either. And so, your earnings volatility is lower, therefore, you need to pay for that.

Yes. But I would be one -- yes, I would say the same thing, Ann. Ann P. Duignan - JP Morgan Chase & Co, Research Division: If you were selling your business.

Right.

The next question we have comes from the line of Josh Pokrzywinski.

Just a question on North American operating margin. I know that last quarter, there was a little bit of debate, and I think, some fine point tuning on guidance. Having a hard time calling what perhaps peak margins look like there and maybe some debate of whether or not you were at peak, given that they were so strong and mixed with the tailwind. Seems like with the performance here and the guide that, that's a little bit less of an issue. Is that a comfort with the sustainability of the current mix and profitability? Is that just better visibility on end markets? Any more color you'd like to add?

I think, we just have a little bit better visibility on where we are with the end markets. Coming out of Q2 is always a tough time for us because we're always sequentially moving up from Q2 into Q3, and trying to make a judgment about those margins at that time, Josh, was a little bit more difficult than it is for us now. And you can tell by our implied margins for Q4, we are even more bullish than we were last quarter.

Excellent. And then, Jon, just a question on pension, with rates where they are today, any sense of what that year-over-year delta could look like in '15 if we freeze the rate environment here?

Yes. I think that a couple of things to keep in mind. Number one, we will need to reevaluate our discount rate, and that's one part of it. There will be a potential change in the mortality table, that will be another part of it. There'll be another change in the rate of return on our assets, that will be another part of it. So just as Don described how we're doing things at the division operating level and rolling everything up, we'll be looking at all of those factors and getting the latest data points. It's too soon to be bullish or pessimistic on the pensions for FY '15 at this point. Pam, do you want to add anything to that?

No, I think, that you said it very well. We will be looking at it. But we do have all 3 of those factors to consider this year. And whereas in the past, we have the discount rate, the long-term of return and we also have the mortality table that will be taken into consideration, which will be somewhat as an offset to, obviously, any improvement in the discount rates. So we'll keep you posted.

Got you. And if I can just sneak in one last clarification on the balance sheet and an update there. Am I understanding it right, the plan always, the entire time, was somewhere between August and call it December that you guys were going to update us on plans, and that's still the case? I think, last quarter, you said fiscal yearend, but it was really more no sooner than fiscal yearend?

You're talking about the capital allocation?

Yes, capital allocation. That's right.

Yes. I think, right now, we're saying calendar year. And yes, we'll update you in August, for sure.

The next question we have comes from the line of Eli Lustgarten.

Just one clarification first question because that was confusing me. You gave us $2.04 guidance for the midpoint for 2000 -- for the fourth quarter, and that includes the $0.15, so that's where your $2.19 operating quarter. Is that correct?

Thank you, Eli, and I appreciate you pointing that out. And just to add onto that a little bit, it may help Alex [ph]. Last year, for the fourth quarter, we gave $1.98, which included $0.14 of restructuring. So it's $2.19 now versus $2.12 then.

So it's strong. And what's driving this fourth quarter is the improvement in profitability almost across all the businesses quarter-to-quarter, plus a little bit of volume, is that correct?

I think, that's a very good summarization.

Okay. And can we talk a bit about pricing across the industries at this point? Are we seeing any issue? Outside, I know Latin America has pricing problem. When you have a volume problem, you're going to have pricing problem. But is pricing pretty stable around or is there any movement in prices at all?

Well, Eli, I think, that we're managing that pretty good. The pricing, we do raise -- I assume you're talking about how we're pricing relative to the raw material inputs?

Well, just the cost versus the industry and versus...

I think, what we're doing, we're managing this pretty well. What we have, and it's a global index, we have what we call the Purchase Price Index, and the goal there is to be less than one, that's basically how we aggregate all the purchases we have from prior periods to current period. Time's divine. We aggregate all that. And we're tracking less than one. So I think, on a purchase price basis, we're doing a very good job of recovering the cost and as well as the margin. And on a sell price, we have also an index, which we call a Soft Price Index that works pretty much the same way. We track that around the world globally for all of our operations, all of our sales. And we want that to be tracking greater than one. So if we accomplish both of those things, which we are doing, then we're going to be recovering our cost and the margins. We increased the aftermarket twice a year. Well, it could be once or twice a year, but we have 2 different times, depending on what the need is, either in January or July. So that's when we address the aftermarket, any changes there. And the OEMs are addressed based on the anniversary of the contract that we would sign with OEMs. So that varies throughout the year. To talk about some of the input costs, actually, the input costs have been going up somewhat. But like I said, we were recovering them as they have been going up. Just some of the energy ones would be oil and natural gas. Oil is up slightly over last July when we started the fiscal. Natural gas is up about 30% from last July, so that's up quite a bit. And then, some of the raw material inputs being castings, that's up around 8%. Steel, just looking at a couple of other ones, steel and aluminum, steel is up about 5%, aluminum up 10%, copper up 3%, and nickel up 5%. So some of the more exotic metals are up about 5%. So there is some pressure coming from raw materials. But like I said, we've been managing that pretty well, and so far, we're staying ahead of the curve. I hope that's helpful. Pam has one thing to add there.

No. I think, I'm just going to say, at this time, we'll take one more question, and then, we'll move to Don's closing comments. Thank you.

The next question we have comes from the line of Jamie Sullivan from RBC Capital Markets.

Just a question on the savings side of the restructuring program. Can you give some color, I know you mentioned $30 million for the year. What were the savings that you achieved in the third quarter and year-to-date, so far?

Yes, Jamie, Jon here. The savings in Q3 would be -- bear with me for 1 minute, $8 million. So that would be $8 million of the $30 million. And for the year, we would be at $17 million year-to-date of the $30 million.

Okay. Great. And then, on the $10 million in additional savings that you'll get next year, was there a particular area that you uncovered through the process? Or was it the initial plan had some additional cost but also an additional savings with it, just maybe some additional details on where the $10 million in additional savings was coming from?

Yes. It's more the latter than the former. This is because we've moved the restructuring number from $100 million to $118 million as we went through all the additional projects. We found that, in some cases, we're doing a little bit better in terms of savings that we had before. And in some cases, we've had to increase the savings. And in other cases, and again, I -- sometimes, we make it sound very simple, these are many, many, many different projects all throughout the world, and so they go both ways. But when you aggregate them all together, we get to that additional $10 million. So it's -- but it's really mostly related to the delta between $100 million that we originally talked about at the beginning of this fiscal year, and the $118 million that we're talking about today.

Thank you. So at this time, I'll turn it over to Don who has a few comments.

Thanks, Pam. So just a couple of closing comments. First of all, I want to thank again everyone on the call for joining us this morning. With our restructuring proceeding as planned, I think, you can see, with the strong operating execution and positive order trends, we expect to close out the year on a positive note, and we'll be well-positioned heading into fiscal year 2015. So we're very pleased with where we are today. A lot of hard work and effort went into the restructuring activities, which was referred to earlier in the year as a self-help program, and it is a self-help program. And I think, we've executed extremely well along those lines. Very difficult. But the team has really performed very well. I'd like to take the opportunity to thank our employees, all the employees, for their continued commitment and the success that we've had. Our global team continues to do a great job executing the WIN strategy and delivering positive results. So at this time, we'll close out, and I'd just like to wish everyone a great day. And then, if there are any other questions, Pam will be available for those throughout the balance of the day. Just give her a call.

Thank you very much. We know you have a lot of calls today, it's very active at this time, especially this quarter, at the end of the month. So thank you very much for your participation. Bye-bye.

Thank you. That concludes your conference call for today. You may now disconnect. Have a good day.