Good morning. My name is Melissa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pentair Q4 2013 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. Jim Lucas, Vice President, Investor Relations. You may begin your conference.

Thanks, Melissa, and welcome to Pentair's Fourth 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 fourth quarter and full year 2013 performance, as well as our first quarter and full year 2014 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 can 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. [Operator Instructions] I will now turn the call over to Randy.

Thanks, Jim, and good morning, everyone. 2013 was very good for Pentair and its shareholders. We had a successful year 1 of integration, delivering 4% organic sales growth, 19% adjusted operating income growth, 170 basis points of margin expansion, adjusted 26% EPS growth and record free cash flow of $751 million. We feel we've clearly demonstrated the power of the Pentair Integrated Management System in delivering these results and we now look forward to year 2 of the new Pentair. Before I go through the results in detail, as has been our practice since the Flow Control merger, I want to note that we again will be discussing our operating results on an adjusted basis to better address the core operating performance of our businesses and will be 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, let's turn to our fourth quarter performance on Slide 4. The fourth quarter was great, organic sales grew 11%, adjusted operating income was up 50%, operating margins expanded 350 basis points to 13% and EPS grew over 60%. We saw growth in 4 of our 5 verticals, with the exception being infrastructure, which is seeing continued headwinds in Australia. While we will discuss each of the segments in more detail, the bottom line is we ended 2013 on a very positive note and feel we're entering the new year in a stronger position than we have seen in the past several quarters, if not years. We completed just over $1 billion in share repurchases since the merger. And as we indicated last month, the board has authorized a new $1 billion repurchase program, since our current authorization has only $150 million remaining on it. We continue to…

Thank you, Randy. Please turn to Slide #12, titled Q4 2013 Reported to Adjusted. As you would expect after a large merger of this size, we still had a few nonrecurring items in the fourth quarter that we wanted to provide some additional clarity around so you can better understand our adjusted operating performance. Restructuring in the fourth quarter totaled $62 million or $0.24 in EPS. The majority of the restructuring related to the elimination of the COO role and the combining of the GBUs that we recently announced. In addition, we also took steps to reduce our operating capacity, primarily in Europe, as well as look at our global G&A support coverage and reduce as necessary, especially in the areas of IT, finance and regional support. We also incurred $5 million or roughly $0.02 of EPS related to our proposed redomicile to Ireland. This included legal fees as well as one-time costs related to SEC filings. We also took the opportunity to further advance our global branding initiatives and we had $11 million non-cash brand impairment or $0.04 in EPS related to a brand reduction in our cooling business in Technical Solutions that we will no longer use. The other big adjustment at year end related to our move last year to a more preferable method of accounting for pension and postretirement benefits. We recognized a $63 million gain or $0.24 in EPS that related to a once-a-year mark-to-market adjustment. As a reminder, this is the annual adjustment that will come in the fourth quarter of every year related to the movement of discount rates. Finally, we had a small gain on a sale of business and a few adjustments to tax as we trued up the books at year end. Please turn to Slide #13, labeled Segment Dictionary.…

[Operator Instructions] Your first question comes from the line of Shannon O'Callaghan of Nomura Securities.

So you mentioned the pickup in North American industrial in the fourth quarter as being pretty encouraging. I mean, can you give a little more color where you saw that across the businesses and how you view the sustainability?

Well, the most important -- in North America, the most important business serving that market is our Hoffman-branded equipment protection business, which is the enclosure franchise in the North American electrical distribution industry. And we saw some good pickups there. And that -- they usually -- those are investments that usually come later in a project cycle. And it's a short-cycled business but sort of a long wave order pattern. So it's been dragging -- it's been lagging the ISM for a while and now we're beginning to see the pickups. So we would view it, even though it is short-cycled business, we would view that as a very encouraging sign. And as I mentioned, going into 2014, that we saw inventories being built by the channel.

Okay, great. That's helpful, unless John has anything to add, but that helps. On the Valves & Controls orders, I mean, they were -- I know you were shipping some past dues and you had the 0-margin backlog. But the orders, up 11%, were pretty strong. What's the timing like in terms of when you expect those to ship? And how do you feel about the margin in that backlog versus some of the stuff you're getting rid off?

Let me start with the second. We've put in place, we believe, better disciplines around the as-bid margins going out, so we feel good about the orders we're taking. In fact, we've passed on some orders because of the margins required. So we think that discipline has remained intact through that 11% growth. One of the reasons Valves & Controls in the first quarter, we don't expect a lot of growth, is those orders are really loading into the second half of 2014 and even a few into 2015. Which is, they're not huge projects but they're bigger projects, so they take a little bit longer time. What we call and I mentioned in the script, 15% growth in MRO, MRO is basically standard Valves & Controls that ship out of stock or with only minor modifications. And that was up 15%. That's the kind of stuff that we can book and turn in a 90-day kind of a window and that was up as well. But the 11% was really -- overall, was really driven by a lot of oil and gas that's going to ship later in the year.

Your next question comes from the line of John (sic) [Josh] Pokrzywinski of MKM Partners.

So just on the 0-margin backlog first, I guess, are we done with that at this point? Or are there any lingering surprises that can still bleed out into 2014?

Two questions, but we think we're down with it. The project that we shipped in Q4 has a small remainder left in Q1, but it's very small. So we don't think we'll mention it as we ship in Q1. And to Randy's question -- or Randy's comments, I mean, we look at the margin and backlog, this was the only one of its type and we scrubbed that backlog prior to closing. And as Randy mentioned, this was an order book prior to the merger completed. So as of this type, we don't think there's any more in the backlog.

Okay, that's helpful. And then just on the reclass here, with the extra segment coming in. Should we think about that as starting to go align some of these businesses to the extent that you may want to get out of a few? I know you've talked about some non-core divestitures in the past. Are we looking at this as maybe an opportunity to bring that a little bit forward? Or is there anything beyond the just trying to get more detail on Australia.

Well, no. This isn't about Australia at all. I mean, this is about the continuing to build Pentair, we've made great leaps forward. We wanted to get into larger, manageable businesses, with the retirement of Mike Schrock, now those presidents report directly to me. So it's a matter of getting larger, if you will, fighting units in the officer suite and so that we can, one, optimize cost structure; but, two, really flow resources from our best -- our best resources to our best opportunities. So it has nothing to do with anything about divestitures or acquisitions.

Okay. And then if I can just sneak in 1 last one. Just on the margin guidance by segment, obviously, the implied incrementals across the board vary a lot depending on what synergy you have baked in there. Flow especially has a pretty healthy uptick in margins with the well revenue and I understand the mix is an issue as well. Could you just maybe parse out what segments have more or less synergy capture in them? And to the extent that you have some numbers that you'd like to share, that would be helpful as well.

Yes. I think absent the headwind that we'll experience in Flow Technologies because of the Australian project and foreign exchange in Q1, what we're going to see is a nice, healthy roll forward of the Q4 synergies coming into Q1. If you recall last year, we roughly had about $10 million of synergies. We're exiting the year at a much higher rate, so we've gotten a really nice year-over-year carryforward from those synergies, primarily around the sourcing and the Lean savings, which are going to be more skewed to the businesses that were in the Flow Controls side, Josh.

Your next question comes from the line of Steve Tusa of JPMorgan. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: So I just want to take a very quick walk down the various moving parts for the first quarter profit guide. I guess, core volume, your sales are kind of 0 to 2. I don't really think that, that should be that big of a factor in your guide. Is price and inflation, are they -- is that still a negative? I think it was a negative this quarter. Is that still like a $15 million negative-ish price versus inflation?

Well, I mean, we still see modest inflation somewhere between 160 and 180 basis points. And we get good price on the install base and the distribution side of the business, which is roughly half of our business. And obviously, on the project side, there's not really a way to externally measure the price, but we're trying to make sure that we're getting the right bid rates to offset expected inflation that could build throughout the year. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Great. So the first quarter, is it negative? It's a -- say it's a negative in the first quarter, is what you're saying?

Slight negative, a little bit better. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Okay. So then we're basically left with productivity and synergies, that kind of combined bucket. And you talked about the synergies being a pretty nice year-over-year compare. I mean, even at just a $52 million run rate, you've got $40 million kind of a loan locked-in, if you do make a little bit of progress. I mean, you should have a very nice number there. You did $80 million in the combined productivity and synergies in the fourth quarter year-over-year. Is there a lot of OMT coming in the first quarter? I'm just kind of -- it just seems like this productivity synergy number is significantly lower than where it was year-over-year in the fourth quarter.

Yes, I mean, I think you're doing the math right. We do have about $6.5 million to $7 million of OMT investment in Q1. We have started that project. It's ramping up. And that's the business process, reengineering of the overall enterprise at Valves & Controls, so that's a pretty healthy investment number. And then what we also see in Q1 is stock comp true-ups and things of nature, which goes into the FICA and expenses, that become a little heavier in Q1 than they are throughout the rest of the year. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Okay. Is that a year-over-year impact? What's the year-over-year impact of that?

That's not as much of a year-over-year as it is versus a Q4 impact. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: So I mean basically, productivity and synergies alone this quarter drove a $0.30 year-over-year V, I don't really see a ton other than maybe stock comp to impact that, I mean, that gets you significantly higher than where you're guiding to for the first quarter on EPS.

Yes. And the only thing you're missing in that, Steve, is that we do get a different set of mix. Right? Because our Aquatic Systems business is going to be much stronger in the seasonal pieces of that. So there's an early buy -- sell-through in Q4. And then you're also going to see a thermal downtick from the cold kind of winter stocking months coming into Q1. So those are seasonably lower. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Okay. So those are what impact productivity is what you're saying, year-over-year?

It's a mixed impact.

A slight mixed impact year-over-year, correct. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Okay, still seems reasonably conservative. Just one other question. What -- how do we think about normal seasonality in the core technical business, fourth quarter to first quarter? And then how bad is thermal going to be, fourth quarter to first quarter? Again, it just seems like Technical Solutions being down as much fourth quarter to first quarter, 450 to kind of 410, it seems like it's a more significant kind of seasonal fall off. Maybe that's just a new seasonality of thermal.

Yes. The seasonality there will be almost entirely Thermal for the drop-off. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: So how much do you think thermal is going to be down quarter-over-quarter?

Roughly $40 million to $50 million of revenue.

Your next question comes from the line of Deane Dray of Citi.

One of the growth drivers for 2014 and hopefully beyond is going to be the impact of the uptick in resi and how that translates into pool, both new pool construction. And then -- so I was hoping you'd put some numbers around this. What's the early read? How do you track it? And then, you also comment on the energy savings piece for pool owners as they transition to like the IntelliFlo pump and where are you in that penetration so far?

Yes, let me start, then I'll turn it over to John. We -- our team in Aquatics has built an incredibly good model, where they track the install base, they track basically the replacement rate of same-same and then they do the upgrades on the energy side and we're going to start with that. Basically, when you take a look at the home install base, I think we're only -- we're still less than 10% penetrated of what we consider to be the install base that is ripe for switching to variable speed and get the energy savings. And that part of the question -- the energy savings can be as much as 90% on the pump. And in the pump, in areas where it's warm, which are -- it was minus 20 at my house this morning, so I have to think conceptually here. Where places that air-conditioning is more expensive than heat, the pool pump is the second largest user of electricity. So it's a huge opportunity, as you know, there's some over 30 utilities now that are rebating conversion to variable speed pump. And we have the leading solution in variable speed pumps. So we're not even 10% penetrated there. So we think that what we call our Eco Select set of products have an incredible future in terms of penetrating that. And now we have new pools construction, new pool construction. I don't have the numbers right at my fingertips, but it's up in California, it's up in Arizona, it's up in Florida. It's flattish in Texas, but Texas never really went down. So I mean -- and those are -- probably more than half of the pools in America are in just those 4 states. So I don't know if you'd add anything, John.

Yes, the only thing I'd tell you is that we track the pool permits and they are around about 9% to 10% of the new housing starts in the U.S., single-family housing starts. And we are definitely seeing an increase in pool permits and we're definitely excited about the incremental content and revenue that should be driven from those pool permits in the new construction side. There's a lag, as you know, but ultimately, we feel that's going to be a help to the market upside.

And one of the other ones, the pumps are also switching from incandescent to LED lights, which saves a lot of power. In fact, that's -- right now, that's a big conversion going on in commercial pools. And as you know, we have a nice position in controls and lighting for commercial pool as well, so it's -- I would say, it's all good in Aquatics.

And was there an impact on the early buy that you typically see in the fourth quarter?

Well, early buy was strong, which indicated -- and there wasn't anything exceptional about the early buy program. So it is indicative that the pool dealers and the distributors are expecting a good year.

And then last one for me and I'll still stay in the pool side, is if you had to gauge for 2014 the new product vitality of Pool, what percent of your revenues would come from products introduced in the last 3 years?

Almost 30%, Deane. It's our highest vitality index that we have currently. We're starting to build a nice pipeline in filtration process as well. But pool leads the way with the technology and the innovation. And we're seeing a lot of nice new product content coming through that business.

Your next question comes from the line of Steven Winoker of Sanford Bernstein. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: So I guess in light of the 11% core growth here, I would've expected more margin coming through, even excluding the 0-margin backlog. And therefore, that mix headwind that you're talking about, I've got to believe it's a bigger deal or there was something else going on in the incrementals kind of x synergies that I'm just not getting here. So maybe where were you surprised, you're excluding that whole 0-margin backlog discussion, was it -- is it all mix, or is there something else going on around the portfolio? Or just a little more color there would be helpful.

I think it's a little bit of mix. I do also think that as you complete Q4, you look at distributor-dealer rebates, sales incentives, truing up of incentives related to overdrive for the year end sales. I do also think that there's always, when you have strong performance at the end of the year, things like warranty, E&O, et cetera, seem to become more of a discussion item. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Okay. And what gives you confidence, as you're sort of looking at guidance, therefore, in 2014 that your ability to forecast some of those things, I guess, is more maybe higher conviction?

It's a great question, it's the blue chip of our operating model right now, which is more predictable and consistent results. As you know, we're getting better in Valves & Controls, but we're still learning. And it really comes around standardization and process understanding. And that's part of what all Lean is about. And so I think we feel better today, but there still are a lot of ways to go from the predictability side. But I do think we understand it better. We know where our top-focused factories are and we've got our arms around how to improve it. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: And your biggest surprise positively on the volume front was where? I mean, obviously, there's a lot of positive numbers here but...

Valves & Controls. Valves & Controls. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Yes, but within Valves & Controls, which vertical or region was the most?

Oh, energy, oil and gas.

It was energy. Oil and gas and energy. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Okay. All right. Great. And then just finally, so I guess we're looking at a $10 million after-tax cost or something for that redomicile. I assume that's all in. And is it worth it at this point, in terms of what are you getting out of it, how should investors think about it?

Yes, it will be a little less than the 10 and we will have a better governance structure in our views. And we also do pick up a little incremental tax benefit on a go-forward basis associated with the opportunity to do things that we'll have in the U.K. versus what we had in Switzerland.

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

I just wanted to go into the restructuring and OMT cost a little bit. If you could maybe just answer 2 questions on the restructuring. That consolidation of -- to pull the presidents closer to you, Randy, could you kind of unbundle the $62 million a little bit? It just seems like a big number to do that. And my follow-up would be, which of the benefits from these expenses or how do the benefits from these expenses sort of accrete you? Which bucket, is it productivity or does it move you -- does it give you assurance on the 320?

Yes, let me start, then I'm going to turn it over to John with the specifics. What John mentioned, if you will, the delayering and the simplification of the organization as the first one, it's a relatively minor part of the $62 million. And just the leadership pieces is a small part. There was also structure underneath that, which is SG&A that came out, which had really less to do with the, if you will, the change in leadership structure and more to do with our view of what was required. We kept more cost in. We weren't -- we were careful not to break anything we didn't understand. We didn't want to do that in the merger, since this is a merger of equals. And so once we spent 1 year at it, we realized where we could be more efficient. So there was a tranche of that. And then there was a bunch of other pieces in it, too. So John, why don't you go through those pieces in a little more detail.

Yes, real quickly, Scott, just to frame it. The $62 million will yield close to $40 million in annualized savings when complete. I mean, obviously, we'll get maybe $30 million or $35 million of that in 2014 and then we'd have that annualized rate going into '15. As Randy mentioned, a lot of it was the structure associated with standardized global process around sourcing, manufacturing, IT, finance support, some regional structure alignment. And then we have a few small factories that were higher cost and some higher difficult -- or higher degree of difficulty areas to get after it and we had an opportunity to downsize a couple of those factors in Europe. And that's remained about half of the charge. And we feel like long term, that's going to position us in '15 and beyond for a much better operating structure. But it is part of the synergies, the 310, that we're going for. But at the same time, I think we feel like that funnel continues to grow and we're really focused on our end operating model and not a number related to a synergy.

And just to finish it out in the terms of the benefits of the change in structure. Right now, my focus is on building the best winning culture that we can. And to do that, I want to make sure that we have very, very tight alignment up and down the company, from John and I, through the presidents, all the way down. So to have 5 presidents who are now sitting at the table, talking to us directly about the opportunities and to get them to think not just about running Valves & Controls, get them thinking about being an officer within Pentair, thinking about how to optimize Pentair, that's a huge change. And it's a change that is going to be extraordinarily beneficial as we build Pentair to its next crescendo.

Okay, fair enough, on the 310, I said 320, I misspoke. But I guess my question would be, if you kind of said the 310 last call and then we have these restructuring charges, this call gives us all of these savings. That's a good chunk of change in savings. Is there a reason why the 310 didn't go up?

I think you should feel confident that we have a richer funnel to achieve it. And when we feel confident of flowing through the 310, we will definitely share that with you, Scott.

Fair enough, John. On the OMT, is that a productivity bucket or is that a synergy bucket as well?

It is long term both the single, biggest driver of the tax rate coming forward because we're creating a global structure around that Switzerland principle. But it's also the business getting off the 29 different disparate ERPs and 29 different processes that are run at 80 sales and distribution centers from, to getting 1 common model that optimizes the product design technology into the manufacture and delivery to the customer. So it's a major re-business engineering, which we think is going to yield value, both in delivery, quality, operations performance and G&A support structure. As I highlighted in Analyst Day, we try to drive about a 4% G&A target per GBU. Most of our GBUs are coming close to that number. We're still about 3.5 to 4 points higher in Valves & Controls. So this OMT is a big driver to getting that efficiency out.

Your next question comes from the line of Andrew Obin of Bank of America Merrill Lynch.

Just a couple of follow-up questions. So just to understand, on Q4 versus Q1 year-over-year growth comparison, there was no pull back into Q4 from Q1, right? There were no timing issues in oil and gas or anything like that?

No, not that we're aware of.

And just as I think about sort of oil and gas outflow, you sort of stated that you still have not seen any megaprojects and that you will announce them when you see them. Can you give us, though, some color as to where the negotiations are headed, what does the timeline look? Just because the orders were just so strong in Q4 and I just want to understand what happens to this momentum going to the first half of the year? And I know you've said second half, but just what's going to happen in the first half? What are we going to see in terms of orders and revenues?

Well, just speaking about megaprojects, there are some large things in Canada that are still being looked at and worked on and there are certainly large developments to support oil and gas developments around the world. We just don't ever want to build -- we don't want to build plans counting on those things, that's why we want to be clear about them and we'll talk about them when they happen. We feel good about our position on them. But there are still a lot of other projects that are still big, $10 million, $15 million, they can still be big, but they're not what we would call megaprojects. And we see CapEx -- there were a lot of delays in the oil and gas industry, just deferrals, just things are going slower. And we saw a pick up in the fourth quarter, and we hope it's the beginning of what's going to be a sustained pick up, to yield probably an oil and gas spend in the mid 5-ish percent kind of range growth in 2014. We also saw some large power plant orders finally get placed that we've been working on for a year, over a year in China related to their new development program. And so that's -- that also helped.

But it sounds like you don't have push-outs and delays you have seen last year, you just don't want to commit to anything this early, is that fair?

On megaprojects, yes. That's fair.

And just a follow-up, let me try to sneak one in. This earnings season has been very interesting in the sense that some companies, you're sort of not seeing a lot of evidence of a pick up. You guys are a lot more positive. Whether you guys generally come out on the pace of the global economic recovery and economic recovery in the U.S., what's your take?

Well, I think the U.S. -- I mean, we all would like to see the U.S., overall, we love to see GNP get up over 3%. And I think, I'm not an economist, but I think it's got a better shot at that because we're starting to see industrial come along and residential seems to be solid. And there's a lot of things positively moving in the U.S. The brightest change is -- I don't go to Davos, but coming out of Davos, it's pretty clear that people are feeling like Europe really has, I call it, clearing the bottom. Europe seems to have some mode of force going forward and that's a big deal to us. As I mentioned, it's one of our most profitable residential markets and it's also a great thermal market and we have a lot of operations there. So and our focus has been on where we can drive growth. I'm really pleased with our progress in Africa and the Middle East. And a lot of that is the initiatives that we're taking. So I think that, that will continue. And so I think we are more positive. I can't speak for why others aren't.

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

Just as you split these process and flow segments, can you just talk about where -- what you think the long-term margin opportunities are in each of those businesses? I mean, Flow certainly seems like a pretty notable laggard as we look at it today.

Yes, I think Flow has opportunity on both sides, both the Australia and water business, which right now were in historically low revenue levels. That business has been mid 15%-ish margins when it gets to normalized shipping rates, it is pretty profitable when it gets to those levels, as an example. And then we still have opportunity as we build the infrastructure side and the engineered components of Flow Technologies, which is more mid-teens types of margins. So I think as both of those grow, you can see some significant ROS opportunity in Flow Technologies. When you look at Process Technologies, obviously, we've got a super high-performing Aquatics business and we've got a really high-growth Process Technologies filtration process business, which is starting to be gaining momentum. And we're starting to really see the benefit and power of Lean and sourcing activities driving that margin upward. So I, right now, always look at where we are opportunity-wise versus where we're sitting. And both of the businesses have significant opportunity to move forward.

Okay, great. And then just your qualitative commentary on industrial and some of the momentum just doesn't seem to point to 1% to 3% growth. So are there some headwinds we're not talking about? Or is that maybe clearly a source of upside as we move through the year and see this visibility continue?

As a vertical market for industrial, we grew nearly 10% in Q4, 9%. It is the only time this year we grew in industrial, globally. Right? So we had the easier comparison year-over-year. That pie makes up half of it. And then we saw about a mid-single-digit on a more normalized basis. So as we head to this year, we're cautiously optimistic that we're finally going to see the capital spending and the investments and the productivity that we thought would happen last year, Jeff. That's the way we're looking at it. So we're hoping to earn what we're forecasting. But I think right now, it feels appropriate.

Yes, just 1 quarter doesn't feel like a trend to us is basically, I guess, what the short answer would be. I'd rather plan a conservative and beat it than plan an aggressive and miss it.

Your next question comes from the line of Nathan Jones of Stifel. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: Just following up on a previous question about incremental margins, I know it was asked in Valves. The incremental margins in the fourth quarter on organic growth, so x the synergies and other stuff in there, was also pretty soft. And Randy, again, you talked about strong drop-through in 2014. Can you talk about maybe what held those incrementals down in the fourth quarter and what gives you confidence that it will improve in 2014?

I'll just say one thing. We talked a little bit earlier, when the growth to price is -- we had to true-up our sales incentives, our distribution incentives and some of our other reserves because we haven't been accruing at that rate because we didn't expect it. So part of that is just truing-up some things that were more than the quarter. But John, do you want to add anything to that?

Yes, I just want to say that I think there's 2 ways to look at it. I mean, one is if you take a look at the drop-through year-over-year on the incremental revenue, from 2012 to '13, I still think you're in the mid-40s of the conversion rate. When you take a look at it as the incremental versus forecast, you're going to see a little less of a drop-through. And some of that might be our conservatism on the way that we expected what the revenue should be and more confident on the income side. And then as Randy mentioned, we had some true-ups that we had to do on the incentive side.

We also in the Food & Beverage space, we shipped more systems than products. And the systems have lower margins. So there was, within the Process -- what we call the Process Technologies, or in the first quarters of Water & Fluid, there was some mix going against us there. But we still like those systems. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: Okay. Speaking about Food & Beverage, obviously been an area of real strength for you guys over the last year or 2, forecasting the growth rate to go down. Have we seen kind of the peak through the pipe on there? Is this 5% to 7% kind of what you would think of as a long-term growth rate for you guys in that area?

Yes. That's what we believe is maybe long term, could be more in the 6% to 8%, but 5% to 7% is close enough. We have double-digit growth. We had a lot of shipments in the membrane, the Beer Membrane Filtration business, the coal block. We had a lot of shipments this year. I don't know, if you go back and you look at 2012, we had a bunch of projects that we had won that just were delayed. We got what we thought we get in '13 and some of the things that got delayed from '12, we got those shipped. But still very positive trends in that industry. So we think it's -- high single-digits is a reasonable expectation for Food & Beverage. 2 things are happening. In the developed world, some of our newer technologies really offer opportunities for more sustainable food production, more energy-efficient food production, more environmentally-friendly food production. So we think we play into the capital spending in the developed world, which doesn't really need to pass Food & Beverage. And then of course, as we look at the middle class and building out the food manufacturing capability in dairy, in soft drinks and beer, that's why we're active in Africa, that's why we're active in Southeast Asia, these are places that all of these need to be built out. So and we believe we're -- we have great technology and great teams to do it. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: That's helpful. If I could just sneak one in on the balance sheet. Can you talk about where you are in terms of working capital in Valves & Controls and where you would target to get to and kind of what level of capital that still is to free up?

Right now, we're still sub-3 in a working capital returns basis in Valves & Controls. I mean, we believe we can be at least 5. As a company, we used to be closer to 6. So there's opportunity there and certainly, a key focus in 2014 and '15 is unlocking that cash value.

Well, the -- and the OMT project is a big piece of that. John mentioned, it's going to help our efficiency, it's going to help us be one Valves & Controls player to the customer. It's going to give us a huge benefit in terms of managing our inventories, our receivables, our payables, much, much more effectively. Nathan Jones - Stifel, Nicolaus & Co., Inc., Research Division: And if you did get from sub-3 just to say 5, what would that free up in terms of capital?

It'd free up enough money for me to buy another company.

Your figure of 5 would be 20% of sales. Today, we're well over 33% of sales. So 13% times the revenue basis will give you your mathematical opportunity there.

Your last question comes from the line of Brian Konigsberg of Vertical Research.

Just following up on the working capital question, I mean, the 105% conversion for this year, are you assuming any progress on those initiatives? Or is it really just kind of the core business and any progress would be incremental?

I think that 105% does not yet anticipate substantial or significant working capital progress. I think when you take a look at the net operating profit after tax and you take a look at the amortization plus depreciation minus capital, you'll see there's not a significant improvement in working capital assumed in the 105%.

Then I would assume you would expect to get some of that progress this year.

Yes, it's a focus of ours.

Okay. And on the 0-margin revenue, can you just tell us how much was recognized in 2013? I think you said it will bleed a small amount into '14, but I'm just curious what the year-over-year would be.

There will be another $12 million of shipments to go on that particular project.

And how much did you recognize in total in '13?

Roughly $35 million.

$35 million. Okay. And actually just on the large projects side, so you talked about not incorporating it into the plans. We've seen a couple of -- I think we have 3 large ethane crackers in North America. We've had a large LNG plant authorized at Freeport, a couple of Canadian projects. 1 large Canadian project has been authorized. You talked about lead times for valve orders being between, I think, 12 and 36 months. I mean, these are particularly large projects. Would you -- I know you're not big in NIM, but conceptually, would you anticipate you will start seeing the orders start surfacing from some of these EPC awards?

Yes. I mean, the valve package usually goes out later in the -- later in those kind of projects. But you can count on us pursuing all those mentioned.

So '14 will reflect some of that.

Orders.

On the orders front, right.

There's been some significant analysis on these megaprojects that suggest that the delay time increases based upon how large the project is. There is often also a series of requotes that happen when they don't hit the price points, the target points. So we have to be patient. And as you know, Randy and I are extremely patient people. I think when it starts to unlock, I think maybe they'll be a little longer on the megas as far as the shipment rates or shipment timing. But overall, we should start to see that come through in the tail end of '14, heading aggressively into '15.

Well, the nice thing about the ones you mentioned, given a lot of them are in the U.S., we do feel some of the complexities around the large projects will be easier to manage on those U.S. -- the ethane crackers, LNG terminals, we like LNG plants.

Do you feel you're more competitively advantaged that these are domestically-based rather than international, or does that not matter too much?

Well, we have very -- we have global coverage. So we don't feel like we're disadvantaged anywhere in the world. Those applications are ones that we have particularly good quality offerings for.

And I now turn the call over to Mr. Jim Lucas for closing comments.

Thanks. I know we weren't able to get to everyone today and I'll be sure to follow-up. And if anybody has any follow-up questions, please feel free to e-mail me. And operator, if you could please give the replay info.

Thank you for participating in today's Pentair Q4 2013 Earnings Conference Call. This call will be available for replay beginning at 12:00 p.m. Eastern time today through 11:59 p.m. Eastern time on February 28, 2014. The conference ID number for the replay is 31093484. The number to dial for the replay is (855) 859-2056. This concludes today's conference call. You may now disconnect.