Good morning. My name is Tracy, and I will be your conference operator today. At this time, I would like to welcome everyone to Pentair Q2 2013 Earnings Conference Call. [Operator Instructions] Thank you. I'll now introduce -- turn the call over to Mr. Jim Lucas, VP, Investor Relations. You may begin your conference.

Thanks, Tracy. And welcome to Pentair's Second Quarter 2013 Earnings Conference Call. We're glad you could join us. I'm Jim Lucas, Vice President of Investor Relations. With me today is Randy Hogan, our Chairman and Chief Executive Officer; and John Stauch, our Chief Financial Officer. On today's call, we will provide details on our second quarter 2013 performance, as well as our third quarter and full year 2013 outlook as outlined in this morning's release. Before we begin, let me remind you that any statements made about the company's anticipated financial results are forward-looking statements subject to future risks and uncertainties, such as the risks outlined in Pentair's most recent 10-K and 10-Q and today's release. Forward-looking statements included herein are made as of today, and the company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances. Actual results could differ materially from anticipated results. Today's webcast is accompanied by a presentation, which could be found in the Investors section of Pentair's website. We will reference these slides throughout our prepared remarks. All references today will be on an adjusted basis, unless otherwise indicated, for which the non-GAAP financials are reconciled in the Appendix of the presentation. We will be sure to reserve time for questions and answers after our prepared remarks. In recognition that there are other calls this morning, we will target to be done in an hour. [Operator Instructions] I will now turn the call over to Randy.

Thanks, Jim, and good morning, everyone. Let me begin with our second quarter performance, which is on Slide 3 of the deck. Pentair's second quarter was strong for many reasons. We were very pleased with our 4% core growth in the quarter and saw 2 of our 3 segments grow, which highlights our narrowly diversified portfolios balance. All 3 segments drove operating margin expansion greater than 100 basis points, and Water & Fluid Solutions achieved a 15% operating margin, a record for that segment. Our adjusted EPS came in at the high end of our guidance. It has been 9 months since we closed the flow control merger, and every day we see further support for the rationale of the deal. We remain confident in our ability to deliver on the synergy targets we've outlined given Pentair's proven track record of execution and the actions we continue to identify to drive our success. This is important since many of our end markets around the globe are sending mixed signals ranging from sluggish and pessimistic to moderate optimism. Our continued North America residential recovery, strength in Food & Beverage, and steadiness in Energy, is helping counterbalance the ongoing headwinds in Industrial, where many had anticipated a second half acceleration does not appear to be materializing. Before I go through the second quarter results in detail, I want to note that we will be discussing our operating results on an adjusted basis to better address the core operating performance of our businesses, and referring to 2012 on a pro forma adjusted basis to provide a more accurate apples-to-apples comparison that includes flow control in the results. With that, here are the numbers. As I mentioned a moment ago, second quarter revenue grew 4% on an organic basis with foreign exchange neutral in…

Thank you, Randy. Please turn to Slide #11 titled Q3 2013 Pentair Outlook. For Q3, we are introducing guidance of $1.9 billion in revenue, around $245 million of operating income or about 13% ROS, and adjusted EPS of $0.83 to $0.87. There are a couple of meaningful assumptions built into this estimate. The first assumption is that what we do not see any sizable acceleration in global industrial shipments and that the current sluggish trends continue. The second assumption takes into account that we are expecting some shift in revenue from Q3 into Q4 in the legacy Flow Control businesses as we change our fiscal year end from September to December to align with the Pentair fiscal year end. Inclusive of these 2 events, we expect Q3 revenue will increase 1% to 2% for Pentair, with Water & Fluid up around 3% to 4%, inclusive of a couple of points of year-over-year project headwinds in the Australian pipe services business. We expect Valves & Controls revenue to increase around 1%, inclusive of an estimated 2 to 3 points of shifted revenue from Q3 to Q4 due to the change in fiscal year end. And finally, we are forecasting Technical Solutions revenue down about 1% as we continue to experience a more subdued industrial recovery than previously anticipated and delays in larger projects within the oil sands at Canada. We expect to begin to see a more pronounced expansion of operating margins across all segments as synergies accelerate, especially with contributions from sourcing and Lean and easier year-over-year comparisons. Overall, we expect adjusted EPS to be up greater than 20% with the tax rate still hovering around 25%, in line with the original guidance, an interest of around $16 million and share count of around 202 million. Please turn to Slide…

Thanks, John. My summary, my last page is on Slide 18. In closing, we delivered on our first half commitments and we will remain well positioned to meet our 2013 full year goals. While the anticipated second half acceleration in Industrial and a growing FX headwinds have dampened our top line expectations, we continue to see strength in North American residential and Food & Beverage in addition to backlog in Energy that remain strong. Our integration and standardization efforts continue to build momentum and we now expect $105 million in synergies in 2013 versus our original target of $90 million. We're pleased with the success of the integration so far and realize that there is still a lot of work to be done, but the adoption of PIMS within the Flow Control businesses continues to exceed our expectations as we evolve into one Pentair. Thank you, and operator, can we please take our first question?

Your first question is from Michael Halloran with Robert W. Baird. Michael Halloran - Robert W. Baird & Co. Incorporated, Research Division: So could you just dig in a little bit to the Food & Beverage strength, and specifically what areas you're seeing it in? And also, if there's any tie-in to some of the things that you're doing with Tyco on the Food & Beverage side and any of the revenue synergies there that might be developing?

Sure. In what we call Food & Beverage, we have 3 focus areas. One is agriculture, where we have 2 positions, which is basically irrigation, largely North American-related and then crop spray, which is on tractor, on equipment spray technologies, that is actually a global business. We have what we call our beverage business, which is supporting the manufacturers, if you will, of Food & Beverage. And then we have the Foodservice business, predominately our Everpure brand that supports the restaurants and other foodservice players. All 3 of those businesses grew double digit. Irrigation has been -- irrigation and crop spray has been a strong focus of ours, and that growth is coming in North America and is the strength of the farm communities, essentially it's driving those, as well as the nice global initiatives with some of the winning OEMs. If you recall last year in the beverage side, basically dairy and soda and beer, last year was a tougher year where the projects we're in -- we were working on a lot of projects but they weren't shipment. This year, we won a lot of those and they're doing very well. Dairy in North America is very strong, as well as beer. Not so much in the developed markets, but in the developing markets, particularly Africa and Southeast Asia, the beer industry is growing very rapidly. And we have leading technologies in that arena. Also in that arena is where we are getting the synergies. John mentioned $10 million of orders to date because of the synergistic offerings we have between our membrane technologies, our hygienic valves and the broad valve line that came from Tyco, and that's where the $10 million win. So the synergies are helping there. And then finally, Foodservice. We are the strategic partner for the leaders and we have a lot of very state-of-the-art systems that they're adopting as standards. And as they grow globally, we're winning with them. So that's been a focus of ours for a long time, as you know since 2003 actually, when we bought Everpure. And it's nice to see it all working. Michael Halloran - Robert W. Baird & Co. Incorporated, Research Division: And then the follow-up on the order side for the Valve business. Could you maybe just talk a little bit about the underlying momentum you're seeing there on the quoting and the bidding side? And what your team is saying for how they expect some of that to materialize as you get to the back half of the year and specifically, in the energy and power-oriented end markets?

Ill provide some texture for your and then John can add in. One of the things we've seen is fewer larger projects and a lot more smaller projects. That's reading out in service volume, it's reading out in MRO. And as we've said, we've seen more process bidding in the U.S. as capital, particularly for the chemical industry, cap spending in North America versus other areas has been rising. So we're seeing bidding activity there. I mentioned oil and gas is strong but lumpy quarter-to-quarter. And it's mostly upstream activity that we're involved in. There's a lot of midstream activity, but that's an area, I think, where we need to grow share. And then power, where we're the leader, we have a decent backlog. There's lots of activity in the developing world, we'd like to some of that to break free to shift. So John, if you'd add anything.

No. I think you covered it. I think, I'll just add to Randy's point, that I think it's not as predictable as certainly our business and we would like, but we're still seeing nice orders and we're still experiencing right now, record backlog.

Yes. One thing I'd say is the new organization that has been put in place has really clarified and simplified some of the decision-making there, so we're -- I mentioned in the script that we're seeing an improvement in the margin and backlog. We felt to shift some what I would call ugly projects that we've taken with more revenue in mind than margin. That's the process that's been fixed. But we still have to mind some of that through the backlog into sales over the rest of the balance of the year.

Your next question is from Jeff Hammond with KeyBanc Capital Markets.

So I just want -- just to be clear on Valves & Controls, is the shift that you're seeing 3Q to 4Q more because of the organizational change or because of projects moving around?

We think it's this simple, Jeff. I mean they had a Q3 fiscal year end and as you know, there is always a push for incentives and to ship as anything you can and book as many orders as you can by the end of whatever your fiscal year end is. The natural year end in this business, because it's a capital spending across an annual cycle, would normally be the Q4.

It would be the calendar Q4 like all the customers.

So what we're anticipating is that we will see a likely revenues that might have been accelerated into Q3, follow their natural course of action and likely land in Q4.

Okay. And then in Water, it looks like you're calling for core growth kind of in line with the first half or maybe a little bit lower, yet the comps are a lot easier in the second half versus what you went against in the first half. So is that, again, timing of shipments in some of this Food & Beverage stuff or are you seeing some deceleration in some of those businesses into the second half?

No. We're seeing strength across all of the -- what would be the legacy Pentair Water businesses. The only area that we have a little bit of headwind, Jeff, is we picked up a Water business in Australia, which is part of the Flow Control businesses. And there is a lack of projects in the backlog right now, primarily because most of the mining projects are being pushed into next year. So we don't have -- so we had a year-over-year headwind, as I mentioned in my prepared remarks, relative to that item, and everything else is continued strength.

Your next question is from Josh Pokrzywinski with MKM Partners.

Just to begin again on the Food & Beverage and the visibility there. I mean, it seems like that was a bit of maybe an unexpected tailwind this quarter, at least, versus what you had in first quarter '13. You're kind of doubling the growth rate through the balance of the year. And I think for such a small business, in the grand scheme of things, to add, I think on the consolidated basis, the point to full year growth. I'm just trying to understand, does visibility take you through the end of the year? Are there a chance -- is there a chance that you could get more project push and pull there quarter-by-quarter? Obviously, people are still grappling with the seasonality and I think so much volatility in the small business, any color there would be helpful.

Sure. Because of the range of different areas we're in, some of them are fairly short cycle. The irrigation business is sold through distribution and it's a shorter cycle business in North America versus the brewery business, which is -- we've got those scheduled out a number of quarters. We've got good visibility in that. So it's really kind of a mix. When you think of -- when I think about the strategy that's informed everything we've done to focus our company on going after the billions of new middle class people and the demands they're going to drive, this has been a big focus. And I wouldn't say that -- and certainly, 25% growth in this segment was a little probably higher than we would have forecast, and I'd like to get to used to forecasting that, but I don't think we forecasted that business for the second half, have we, John?

No.

The same rate.

Mid-teens.

Got you. That's helpful. And then just on the synergies. I think I asked last quarter as well, it's probably a little too early. But any more color you can provide on what the bridge may look like between the $105 million in synergies this year and the $230 million in 2015? And how we should think about 2014 as the bridge between 2?

Yes. I think I mentioned in my remarks, we're at $105 million and we're exiting at $140 million plus. The plus would mean that we expect to realize $140 million of synergies from the exit rate of Q4, there, Josh. Plus, if you take a look into the financials, we also took some incremental restructuring initiatives this quarter, which will not likely benefit us until 2014. Obviously, we want to get as much as quickly as possible for 2 reasons. One is we want to make sure that, that's the tailwind for us and the second reason is we're driving the standardization across the GBUs for if and when we can do acquisitions again that they can become synergistic and quickly accretive. So there's a push to get that as sooner rather than later as far as the total synergies. And by the way, there's no governor on what the total synergies can be. And as we were trying to hint, we've got a clear pipeline that should take us higher than the $230 million that we're driving to.

Your next question is from Steven Winoker with Sanford Bernstein. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: First question on the Page 20 of the reconciliation, you do mention the restructuring. It looks like you're saying it's complete for the year. Why is it 0 for 3Q and 4Q?

We don't have anything quantified at the moment, Steve. It doesn't mean we wouldn't continue to look at opportunities. I mean, I think every time we meet and learn more about these businesses we see more opportunity around the corner. And definitely if we're going to see a flatter industrial cycle over the horizon, we'll likely go back for more. But right now we don't have anything quantified and we don't have any specific projects in the pipeline. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Even in getting to that full $230 million number?

Yes. I mean, I think in the $230 million, I mean our goal would be if we look at '14 and certainly in '15, we've set aside what we call this integration standardization team budget and we should be able to handle annual restructuring within that context as we drive to the '14 and '15 numbers. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Okay. And then second question on your margin breakout, you had 20 points on volume leverage, 260 price productivity mix and 160 offset on inflation. With 4% growth and even looking at minus 4 in Technical Solutions, I would have thought my math on a higher fixed cost base would have gotten me a slightly more significant margin on the volume side. And then maybe just give us a sense for productivity within that price productivity mix, just a little bit of breakout there to get a sense for what's really happening as a result of operations as opposed to sort of pricing or mix?

Yes. I think all your math is accurate. So the only 2 items that I would bring some color to, which were negative mix impacts or negative productivity is we were down double-digit in our Residential & Commercial EMEA business, that's a highly profitable business for us. So that's inclusive on that negative productivity or negative volume impact, Steve. And then the second one is, some of these beverage projects, these large systems that we are putting into the new breweries do bring through a little bit lower margin than when we get the replacement membranes through those systems. So those would be the only 2 things that I would add in addition to the math that you went through.

Your next question comes from the line of Scott Graham with Jefferies.

One question, one follow-up as requested. What's your confidence, Randy, in being able to sustain positive price for the rest of the year?

One of the measures we always do when we talk about being in business where we can pull our own destinies, one of the proof positives of that is your ability to get some price. In our businesses that go through distribution, which are a lot of the ones that are growing right now, the Foodservice business, the Residential business, the irrigation business, the Aquatics business, through distribution, it's good structure, there's been no changes in competitive dynamics that would indicate to me that we shouldn't be able to sustain price there. The area that's always -- it's difficult to calculate price is in the project area. So in the project area, Food & Beverage, and the larger bids in Valves & Controls and Thermal, what we look there is that's why we're tracking margin in backlog. It's hard to say whether it's price, but the important thing is to get margin. So I feel good about our disciplines around price and I feel confident in our focus on price.

Great. The follow-up question is probably more for John. John, the productivity target, forgetting about the synergies, but over and above that, the productivity target of 100 basis points per year in each side, the Pentair side and the Tyco side, has that changed at all? Are you tracking along the 100 basis points of your core block-and-tackle type of productivity in each business?

Yes. Scott, I mean, I think we're looking at about 160 basis points a year and we went public saying about 80 basis points a year from core and 80 basis points from the synergies and standardization. And against that 80, I'd say absolutely. And I think we feel like there's more on the court, too. I mean if we get more revenue growth or see more quarters of 4% and above, we should be inching that base higher than what we're targeting because volume leverage is a very powerful thing.

Yes. Fair enough. You always did say roughly 100, I think that you're probably rounding up, so 80. So it's on track, nothing has changed?

No.

Your next question is from Deane Dray with Citi Research.

On North American water, maybe give us some color regarding some of the dynamics and product lines, this is one of the wettest periods that the Northeast certainly has seen in years, was there an impact? I know it's a lower margin on the sump pump side, and maybe comment how the spring selling season in full went?

The wet North East in particular was -- it slowed Aquatics a little bit, but not much. And it's certainly was a benefit in our Flow Technologies business. They had strong -- they had good double-digit mid-teens kind of growth, largely driven by flood-related Residential & Commercial spending. Interesting aside, right now, globally, we have about 50 projects that we're working on, on flood protection. And these are large projects, obviously, more along the lines of what we've done in New Orleans and other places like that, in The Netherlands. So flood continues to be the good focus for ours. But Aquatics, our market share position and because of our leadership and technology and innovation in Aquatics, we do really well within a lot of pools, and that's the South. So they were less impacted by -- they actually had a slow start to weather-wise in the South, but it wasn't quite as impactful as -- if we had just been focused in the Northeast.

And what was Aquatics year-over-year?

In the quarter?

Yes.

We're up high-teens. And just to add to Randy's, and I think this was in his remarks. I mean, the North American residential segment as a whole grew low-double digits. So we saw that strength and clearly we had some easier comparisons on retail, in flow, and so those were up very, very strong. And even Filtration and Processes, Water softener market was up nearly 5%, which that's only the second quarter in a row now that we've seen that growth and that's a later cycle.

Yes. It's a later cycle recovery kind of product line. But I mean, yes, North America, I mentioned in the script that Residential & Commercial was up 8%, that was Europe down. So North America resi itself was up 12% to 14% overall in the quarter.

Great. And then a follow-up on Page 13, when you go through the key internal funnel, the $115 million. There's a line in there with a checkmark that says Pentair experience has been on a factory greater than $2 million in savings. And you've made a reference to the $1 million assumption, and I remember that was from the initial Tyco facilities. You're just showing that -- I'm trying to reconcile the $2 million, $2 million is what you've gotten previously in sort of the PIMS initiatives and showing that the $1 million assumption is conservative, is that...

It's obviously an average, but yes -- you can read into it that, that is below our experience level and we'd be disappointed if we only achieved that result.

All right. That's helpful. And just lastly, the buybacks in the quarter that pace, do you expect to be able to continue that pace carried into next year?

I don't think it will be that pace. We haven't figured out what we're going to do yet, but we felt that it made sense to accelerate the buybacks given what we are looking at in the acquisition funnel and...

And the good cash flow.

And the good cash flow that we had. Obviously, we'll take a look at what Q2 and Q3 and the remainder of the segments look like, look at it at the appropriate time.

But you have the authorization and the cash flow to support that level if you wanted, though?

Yes, to the $1.2 million.

Your next question comes from the line of Hamzah Mazari with Credit Suisse. Hamzah Mazari - Crédit Suisse AG, Research Division: Randy, I was hoping you could give some more color on the second half industrial reacceleration not materializing. I assume that's broad-based? And any particular regions where it's worse than expectation? And also any views on further destocking and what you're seeing in July?

Sure. Let me parse it between the different segments. In the process area of Valves & Controls, we actually see some decent order activity and it's largely in the chemical arena and largely because of the low energy cost we talked about. Our second half assumption is around our Hoffman brand, the profitable juggernaut, if you will, of our Technical Products business, was that we would see the same kind of continuation in order rates. And as we mentioned, June went down. I wish we had better visibility and that's also through distribution. Right now, we just don't see the capital spending breaking out. So what we had was, we had a very profitable segment, a very profitable product line in Hoffman, where we didn't feel comfortable that we had the visibility on the base towards -- to continue with that base assumption that we'd see Industrial up 3% to 5% in the second half. So that's really what it is. I don't think that there's been a major draw down. We don't think there's been a major drawdown in inventory. We have really good visibility on our inventory in the channel. The thing that I've asked our business to do is find out we can see publicly which distributors are performing and we have a few peers left that we can track in terms of their growth. And seeing if we have been active enough in managing our distribution coverage to make sure that we are getting the add back where markets are growing. And that's an area where I'm not yet comfortable. We have adequate recovery, I'd say in the Bakken or some others that should be growing. Hamzah Mazari - Crédit Suisse AG, Research Division: Okay. That's very helpful. And just the follow-up would be on the Valves business. Could you give some color on what you're seeing on the aftermarket side for the Valves business? Some of your peer group is seeing some deferred maintenance still amongst customers, are you seeing that or it seems like your business is doing better on share gain? Any color there?

I don't know if it's that we're in different segments than our peers. But right now, as I mentioned, our service business is up, MRO is up. Now we have a strong focus on it. One of the beauties of the new organization is the clarity of focus we're getting on different areas and the teams rallying together really nicely. They really are running it as one valves team. And in particular, actually, we see the opposite in mining. We see a lot of the activity, particularly in Australia, moving since capital is down, we're seeing maintenance up, which makes sense right now. If you're not replacing equipment, you've got to maintain the equipment you've got. So I think it really depends on where your exposure is as to what you're seeing -- since mining, we've had a lot of focus on where we're losing -- where we're not seeing large projects, focusing a lot on smaller projects. And I think that helped us in MRO and I hope with share gain, but I don't know enough about the business yet to be confident in saying it is or not.

Just to follow-up on Randy's point real quickly. I mean, I think where we're seeing deferrals is in the larger projects. Then we continue to see those larger projects, as many of our other peers have said, being pushed out now. Now Randy and I were also talking that in the industrial space, the capital is at an all-time borrowing rates low, IRR is a really high on putting capital to work. And with the threat of increasing interest rates, at what particular point in time are we going to see that breakthrough, that's not in our forecast right now. But that's what we're monitoring and keeping an eye on.

Your next question is from Brian Konigsberg with Vertical Research.

John, I think you had mentioned, there was a question previously by Steve talking about the conversion of the core business and you highlighted the Water & Fluid component. But actually, the Valves & Controls piece, it looks like the core conversion was fairly modest as well. Maybe can you address that? Was there something unusual in the quarter? And maybe how do we think about normalized conversion rates in that, excluding productivity and price and others?

Yes. I think Randy mentioned this earlier. We do have a few larger projects that are in the backlog that are working their way through, and they will probably be working their way through Q2, Q3 and Q4. Those were won previously. And as Randy also mentioned earlier, we've changed our focus to be more of making sure that we've got a better insight into what the margin backlog is. And quite frankly, our margin backlog is higher now, so that bodes well for the future. But what we've got is a little bit of the shipment that we still have to get.

It's like heartburn.

Okay, I got it.

We're working through the system.

I see. And then actually, you mentioned FX, a headwind in the second half of the year. That just seems kind of contrary to what we see with the Europe for sure. I mean, why is that a headwind? Are there other significant exposures we should be thinking about for Pentair's business?

Yes. Two particular currencies. One is the Australian dollar, which is a big piece of this on $1 billion or so of Australian business we have in both Valves & Controls, the legacy Pentair businesses and also the flow or the pipe and systems business was inside of legacy flow. And the second currency would be the euro. And we did do this forecast at about $1.29. I do recognize that, that's slightly below where the current euro-dollar is. This was factored on about $1.29.

Can I slip one more, a quick one in? You mentioned process actually it's good in North America because of net gas, but Asia, I think the second quarter in a row you said it was weak, maybe you could touch on the trends there and all...

Well, it's really China. I mean, China for Valves & Controls and processes is down. And it's the slower capital spending that's going on there. We have a pretty substantial business there in Valves & Controls. And the rest of Southeast Asia is good. So it's really specific to China that's flowing. I mean, and I think everyone is talking about that.

Do you think China is actually pulling back because of the build in North America or is just an issue of the internal funding mechanisms?

I think it has more to do with just the general slowing of industrial activity there and them getting overshot. Most -- I think, every industry always puts in too much. When the growth rate changes, you really -- you have a bunch of capacity that gets put online that you don't need as soon as you thought. I mean it was true in the power industry in the U.S. and basically every -- happened to the pulp and paper industry over time, but I digress.

Your next question is from Garik Shmois with Longbow Research.

Actually a follow-up to the last question on China and the fast-growth markets in the back half of the year. It was up 2% year-to-date for fast growth overall. Just wondering what your expectations are for the second half of the year in those regions?

Yes. And I'd say we've got it closer to high-single digits in Q3 and Q4. And I think the main reason for that, as Randy mentioned earlier, some of our fast-growth region volume is more project-oriented or related to where the orders in the backlog and the timing of that backlog is. So we do have forecasted higher single digits for fast-growth regions in total for the second half of the year.

Okay. And those would be non-China markets, I'd assume, is that correct?

Well, China would be a part of that as well. I mean one of the markets in China that's big for is power. And we've been building the backlog and throughout the last 3 or 4 quarters, and we do expect those projects to ship in the second half.

Okay. And then just lastly, just on the full year guidance. First half of the year, you had exceeded your midpoint both quarters and you maintained the midpoint for the full year guidance, albeit narrowing the range. I can appreciate that you have more conservative revenue outlook that you cited because of the divestiture, plus FX. It seems like industrial is slowing a little bit, but Water does appear to be accelerating. Just wondering if you could walk us through your thinking on maintaining the guidance despite the strong first half of the year?

Yes. I would say it's less conservatism and it's more experientially-based. We always know it can go well. But we always know stuff goes wrong. And since we don't know what's going to go wrong, we're twice bitten, one shy. Once bitten, twice shy.

Your next question comes from Brian Drab with William Blair. Brian Drab - William Blair & Company L.L.C., Research Division: I think it was mentioned that some of the projects in backlog, some of your businesses are at lower margin than average and some are at higher margin, I think John just mentioned. Can you give us a sense for what the average margin of orders and backlog is relative to the 13.7% that you did this quarter?

I can tell you that the standard margin in backlog is about 1 point higher in the outlook than it will shift. So if I take a look at 2014 and beyond, it's about 1 point higher than what we'll finish shipping in 2013. And it's related to 3 or 4 larger projects or one about what, 18 months ago, Randy? And those projects are at a very, very low margin. And as Randy mentioned, we've changed that behavior to be more margin-focused, and so I think we have a richer more favorable backlog as we go forward. Brian Drab - William Blair & Company L.L.C., Research Division: Okay. Great. And then the legacy Tyco thermal controls business, I know it's about 10% of your sales after the merger, I believe. You mentioned some delays in that business, but are you seeing cancellations, is the oil sands business slowing? And what does the pipeline look like there?

Yes. We referenced Canada. It is the oil sands that have slowed down and we had impact there in the quarter. Year-over-year, there was a really large shipment in the oil sands a year ago that wasn't in the number this year. That was the big Energy down, if you will, in that business. That business has done a nice job growing the smaller businesses though, and nice improvements in profitability in that. So we think most of those progress will go. And when they go, we'll do fine. But in the meantime, we'll grow elsewhere. Brian Drab - William Blair & Company L.L.C., Research Division: So growth in that business over the next 18 months or how is the pipeline?

Yes. Just to remind everybody, what we did was we did go in and pro forma the financials for the thermal business, excluding megaprojects or large projects. So our forecast and the way we're looking at it is primarily base projects and product shipments. And as Randy mentioned, we believe we can grow mid to single digits at that business. And then these particular large projects that we're talking about, they would be phenomenal to have. But we don't have to have them in the way you described it.

Your next question comes from the line of David Rose with Wedbush.

Just a follow-up to the -- a couple of follow-ups but to the last question. Just to be a little bit clearer on the Canadian business and the expectation for thermal. Did that imply we don't have any major projects coming in through the third quarter on a year-over-year basis?

That's correct, yes. There is no major projects in our Q3 or Q4 outlook.

One of the things that, and this is actually kind of fun, one of the things that we're doing as we come to be one Pentair is really to establish a set of principles around how we build the business and forecast it. And anything that we really don't control our own destiny, have really high visibility, let's put those above the forecast. And that's where the philosophy of these megaprojects that John just talk about it came from. We love them when they have it. But we're going to build a business were that's more than gravy. On top of...

I can appreciate there's a lot of legacy business that you did not have. And if we look at the Australian business, what was the drag on that business? And was the pipe business profitable in the quarter?

Yes. It's actually a very profitable piece of the overall business. It's just that there is not a lot of large projects in the backlog and/or in the shipments now. And as you know, the business can cycle up and down from, call it, 10%-ish margins to 20%, 25% at the peak. So towards the bottom of that assumption. And we think there's a political situation that's got to unwind itself as far as the tax on the mining groups. And as that unwinds, we're hopeful that the future is a lot better than the current environment that we're participating in.

And to be clear, that's a component of why you expect the Water & Fluid Solutions to step down in terms of year-over-year growth?

That's correct.

Your next question comes from the line of Jeff Hammond with KeyBanc Capital Markets.

Just to follow-up on that, the synergy and funnel comments. Would you -- I mean as you identified this additional funnel opportunities, is that something you think of as upside in '14 and 15? Or upside beyond '15'?

Well, Jeff, I think not to confuse you, but here's the way to look at it. When we look at the sourcing in Lean, there's both a base and a synergy. And as we've said before, it's hard to track what truly is a synergy sometimes versus what's the base expectation. So we have productivity funnels. We need those productivity funnels, and we've driving gross margin and making sure that volume is leveraged appropriately. Clearly, when we look at the operating margin of Pentair and we look at the operating margin of our businesses, there's a substantial amount of opportunity between where we are and where our benchmark peer groups will be at. And we're not going to lose sight of that opportunity and what we're really trying to do and Randy was talking to me yesterday, we have to drive the business models. And that business model creates that opportunity and these are rich pipelines, but I think they're going to continue to get richer as we go forward.

Okay. But the $230 million is what's in your $5 number?

That's correct.

And so the 160 over is upside opportunity?

It would be if all realized, correct.

All realized below the base, yes. The point, Jeff, is that -- and you can even think about the $105 million versus the $90 million as higher yield of either productivity or synergies. And frankly, I mean, different because what we want to do is build business plans in each of these segments that incorporate both, right. And that's victory. That's only victory if it reads out at the bottom line. So we can't have higher synergies and lower productivity or vice versa. So that's the way we think about it. And that's what John was describing.

Your final question comes from the line of Steven Winoker from Sanford Bernstein. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Randy, we had spoken over the last 6 months about you getting to the point in June or July where you expect to arrive at some conclusions with regard to several of the businesses that might fit better with other owners. How has that thinking progressed in the current environment? How should we think about that going forward?

Well, right now, we never don't think about that and you're right, I did say, I always put things out 6 months, that's probably what I did when I said that. But we're always looking at how things that -- right now, we're going through a process in our strategy where we're looking at dozens and dozens of platforms and looking at the priorities. And at the end of that process, we'll decide where we are. But in particular, a lot of people asked about Australia. As we've gotten into Australia, we look at it we're sort of at the bottom of a cycle in terms of mining and domestic water spending. So we're finding some nice synergies and we're finding some people who are really buying into what we're doing in Pentair, we've taken some cost structure out. So I think it's a better business than I might have thought going in. All right. Thank you all. And operator, could you give the feedback or the call back number? Thanks.

Thank you for joining today, ladies and gentlemen. This concludes today's conference call. And for replay, the number that you would need to dial, okay, it looks like this call wasn't set up with an encore record line.

It's in the press release. Thank you all.

Thank you.

Okay. Thank you very much. This concludes today's conference call. You may now disconnect.