Good morning. My name is Kim, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Pentair Q2 2014 Earnings Conference Call. [Operator Instructions] Thank you. Mr. Jim Lucas, Vice President, Investor Relations, you may begin your conference.

Thanks, Kim. And welcome to Pentair's Second Quarter 2014 Earnings Conference Call. We're glad you could join us. I'm Jim Lucas, Vice President of Investor Relations. Joining 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 2014 performance, as well as our third quarter and full year 2014 outlook and updates to our 2015 target 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 in 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 Investor section of Pentair's website. We will reference to 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 make 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. Before looking more closely at the second quarter results, I thought it would be helpful to provide a summary of what we will cover on today's call. We have a lot of information to share and we want to leave time for your questions. The second quarter met our expectations despite ongoing economic headwinds in our 2 largest verticals, Energy and Industrial. We announced this morning that our board has approved our strategic decision to exit the Water Transport business, which we will cover in more detail shortly. We're reducing our 2014 expectations mostly due to our exit of the Water Transport business, but also due to a reduction in what we see as a more modest topline outlook. This is based on an Industrial recovery that's slower than originally anticipated and continued pushouts within Energy. In particular, we continue to see lower-than-anticipated contributions from Canadian oil sands. And while we continue to win with both small and large customers, many of the large projects have continued delays in releasing capital spending. Six months before the start of 2015, we do not see enough strength in the Energy and Industrial markets in particular to hold the 2015 $5 EPS target. We're adjusting that target to $4.50, reflecting the exit of our Water Transport business and factoring in these lingering economic uncertainties and ongoing deferrals in Energy CapEx. While we have continued the overdrive on synergies and are seeing some growth, it's not enough to close the gap. Nevertheless, we're still targeting EPS compound growth rate greater than 20% overall across 2014 and '15. As we have overall -- as we have overdelivered on synergies, we continue to show the power of PIMS adoption in the businesses that we acquired and our ability to integrate…

Thank you, Randy. Please turn to Slide #19, titled EPS Impact on 2015 $5 Per Share Target. As Randy mentioned at the beginning of the call, we are updating our 2015 EPS target to $4.50. While the $5 target is a number that we have been committed to, both internally and externally, the current economic backdrop is just not strong enough to overcome the impact of moving Water Transport to discontinued operations. We are still very excited in the value creation capability from this transformational deal and continue to expect strong organic growth rates, double-digit operating information for the base, plus the benefit of synergies and the balance sheet, just not quite at the levels necessary to offset the ongoing deferrals in Energy CapEx and lingering economic uncertainties. We're quite pleased with our ability to overdrive in synergies, which we believe speaks well to the power of PIMS and our ability to integrate acquisitions and the higher synergies we needed to offset lower core organic growth rates than were originally anticipated. We have seen continued deferrals in Energy CapEx and a muted Industrial recovery has contributed to grow not quite at the levels of our original expectations. Our decision to exit our Water Transport business removes $0.25 from our base. And as we highlighted earlier in the call, we believe this is the right strategic decision to allow us to reallocate resources to other platforms that have differentiated profitable growth opportunities. We've seen lower CapEx in many areas, but particularly in the Canadian oil sands. We have seen 2 larger projects continued to be delayed and although we have secured supplier-of-choice contracts for these projects, these are the types of pushouts that we have been experiencing with projects of all sizes. This does not mean that these projects will not…

[Operator Instructions] And your first question comes from the line of Steve Winoker from Sanford Bernstein. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: I'm sure it was hard for each a few to come off of the $5 promise, so I understand that. But I'm just now trying to understand, you still got 18% EPS growth in your '15 over '14 plan at the midpoint, I guess. And when I look at that, it'd be hopeful to understand the cost -- the operating margin and cost synergy side again. On the op margin assumption now, where are you next year versus this year?

I'm sorry, the question, Steve, was op margin or... Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Op margin expansion 2015 over 2014.

About 120 basis points. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Okay. And the cost synergy, that old $310 million number, you keep talking about overdriving now. Of the $310 million I'm talking about, full cumulative, where is that coming out now?

Well, I think we -- the $310 million, which I do acknowledge, had about $35 million or so that would be moved to discontinued ops along with Water Transport, so I think that would give you roughly a $275 million ongoing synergy rate that we think would apply to the continuing [indiscernible] Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Okay. And that's still the same number. You're not changing that at all, the $275 million?

Yes, Steve, we're not giving -- I mean, it's -- just to put this in perspective, we're not -- we're going to go back to our normal giving actual guidance for the year in -- when we get -- when we talk in December, which is our fair practice. We felt, as all our degrees of freedom began to get pinched away for us against the $5, we felt we owed it to you to tell you. So the way to think about the $4.50 is we know Water Transport goes, but we also looked at all the puts and takes, the overdrive and synergies, the -- frankly, the lack of confidence that we have in these head fix we keep getting from the economy. And we've been counting on those to come through on a positive way. And they're coming through, even though we're getting some growth in line with what looks like everyone else's, it's just not something I have a lot of confidence in right now. So that's -- so think about the $4.50 that way. We don't have a definitive guidance -- we're not giving a definitive guidance. The $5 was a target and it was something that we held out there for everybody; us and you. We had multiple degrees of freedom to get there. It's 6 months before 2015. I... Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Okay, okay. Fair enough. And Randy, I remember the last time we talked about Water Transport, you described it as "What do you do with an empty bag of groceries?" And so now, we're putting it over and this is -- it sounds like obviously the right strategic decision over many years to exit this. But what's your confidence in, I guess, even that process moving forward? How are you thinking about it now?

Well, I mean, we really did feel like we needed to build a backlog. And the business, the people in the business have worked so hard and committed to the brutal activities necessary to keep their nose above water and it's profitable. There's 2 reasons to discuss. One is it really isn't part of our strategic roadmap going forward. And right now, it has been a distraction within Flow Technologies. Flow Technologies without them doesn't look that great, right? And now they can focus, really can -- the Flow Technologies can really focus on driving the growth in the areas that look quite attractive for them and continue the exit of the retail side of residential and really focus on what we believe is the bright future for Flow Technologies. We've moved -- we're moving the business to actually report to our VP of Ops, which reports up to John. And we're just beginning the process, but we believe that there are prospects for the business in someone else's hands. And I don't know who that is. We haven't started the process yet. It's early days. We just went through a rigorous discussion with our Board about the right way forward and we think this is certainly the right way forward. And this -- our platform, I mentioned this in the script, this platform approach is really quite helpful in that regard in terms of really identifying and letting us differentiate who's going to -- where we're going to flow more of our resources, a much more granular approach than the GBU approach. Steven E. Winoker - Sanford C. Bernstein & Co., LLC., Research Division: Right. And I fully appreciate that. Just before I hand it off, last quick thing. Price is less than from a inflation in Flow Tech that you called out. What's going on there? And are you -- is this just a question of timing and catch up on the pricing side?

Yes, it is. I mean, the short answer I mean, we are exiting, as Randy mentioned, several product lines within Home Depot in which we did take a large -- within our retail space, which we did take some large concessions on. So that's what we're managing through right now. But that headwind starts to go away in the second half and into next year.

And your next question comes from the line of Steve Tusa from JPMorgan. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: The -- so the restructurings this year, I guess, how much is that going to be? $60 million or something like that, the total?

Yes, that's probably about right. Yes. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: How quickly does that -- do you think that pays back?

We feel like it -- all in, we're just slightly -- since we've done this and we're sort of concluding our large restructuring actions, we've taken about $200 million of restructuring today. And the expected full year run rate benefit of that is roughly $200 million on an ongoing basis. So I would say that this last grouping is consistent with that. I mean, a little bit delayed in the sense that we notify and then the benefits come a little bit later, but that's what we're really running to is an ongoing run rate of about $200 million since the inception of the merger. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Okay. So when we think about the year-over-year increment on that debt has yet to come in 2015, what is that number?

It would probably be approximately $30 million. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: For '15?

Correct. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Okay. And then are there any other -- I think there's this OMT benefits. Is that separate and is that also a plus for '15?

Again, we would think that the investment continues, so the $20 million we're spending this year, we'll have another $20 million of investment next year. And there would be a slight pickup from the G&A savings that we'd expect once we go live with that program. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Okay. And just lastly, on the balance sheet, I mean, very strong free cash flow in the quarter. If -- the $1.3 billion you guys highlighted as kind of an opportunity and then on the next page or a page before that, whatever, you talked about how well you've kind of integrated this deal. You're buying back a little more stock. Is the priority -- given kind of what's transpired here, is the priority to descend the stock with more buybacks or should we take your comments around how well Tyco Flow has been integrated as we're ready to go on to do another deal and we're going to be opportunistic on something of size if it comes along?

Yes. I think the way we look at it now is just really $2 billion of capacity less the $700 million remaining in share authorization. Our goal is to create long-term sustainable value and acquisitions continue to be a big part of that. But right now, there isn't a plethora of significant acquisitions to go get. So short-term, we've been doing what we feel is a disciplined capital allocation model of choosing between all of the options and making sure that we're looking at the one that drives the right long-term value creation. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Right. And sorry, one more question. In terms of the Valves & Controls, the order -- the visibilty on the kind of the order pipeline. Things have been lumpy. Is this the real -- like this 7% growth, did you think there's enough visibility now in the pipeline to say that at least the orders should continue to grow here, acknowledging you're conservative on timing and the revenues and stuff like that?

Yes, I mean, there's a certain amount of lumpiness, as you say. But the 7% growth in orders this quarter, we think portends more positive things coming. We have the quote log, we track ahead of that and that's up as well. It seems to be legitimate, the -- and the real projects and that's up. I think that, that will be good. And I'm really looking forward to seeing how we clock it in third and fourth quarter. That's really going to tell us a lot. I really like the discipline that the Valves & Controls team has put around the quote following now. I think we're in a much better shape than we were a year ago in terms of tracking and managing that.

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

My first question is on the restructuring. And I think that you're pretty much through it now for the year at $69 million. But I think your original expectation was something closer to the $23 million. You did $46 million this quarter. 2 questions. What surprised you such that you accelerated the restructuring actions this quarter? And the follow-on, is it safe to assume that we are done with the restructuring for the rest of the year?

I'll never say we're done. I think we aggressively went to everybody and said, "Listen, we want to put it behind us and we want to move forward. We want to start having reported and GAAP be the same -- I'm sorry, reporting just be the same number for the rest of the year." And on that context, I think we were more aggressive in the quarter based on the fact that we gave that guidance that we needed to put this behind us. But I think, overall, we feel really good about how the teams have stepped up. We feel really good about the productivity actions. And a lot of this is being driven, as Randy mentioned, by PIMS and Lean standardization and all the right things that we're doing to simplify the businesses to be better to deal with from a customer perspective and also to get the standardization in line so that we can be better at acquisitions going forward.

Okay. Okay. That's helpful. And I guess something that I'm struggling with a little bit is the impact of the Water Transport business. And so I think in Slide 8, you guys mentioned that the impact in 2013 was about $0.16 from Water Transport. And yet you gave us a delta last quarter on Water Transport, expecting to be a $0.13 negative headwind to 2014 results, which implies that the Water Transport business was going to add roughly about $0.03 this year. And so, I guess, help me bridge the gap of that $0.03 versus the $0.20 impact that you guys are talking about in terms of the guidance reduction for this year.

Yes. I mean, I think you'll see it in the documents that where we were with Water Transport last year was what we described, which is the fact that the numbers we gave you were last year's 2013 numbers. We expected the business to the roughly flat for '14. When we came out and saw that the projects on pipeline was going to be less and there was going to be less contribution from Water Transport after we gave our original guidance, the goal was to drive the other businesses and hope that we would see back half upside to make up for that difference. And what you're seeing now is what the actual forecast for the business looks like this year, which is significantly less than the way we planned it and significantly less than its contribution last year. The other element that's going through the impact of the EPS is the changing share count from where we were in 2012 at 213.8 million shares to where we expect to be next year, which is sub 190 million. So that if you take that off the contributions, that's where you're seeing the impact.

Okay. And I mean, maybe trying to slice that up a slightly different way. It seems like the Water Transport business was in a loss position in the first of the year. But in the second half of the year, was it your expectation that you're going to get about $0.20 in benefit in Water Transport in the back half?

Well, it was about in a breakeven position for the first half and we thought it would have a slightly larger uptick in the second half. However, we're talking apples and oranges here. Again, the plan was that we'd have contribution in the first half and we'd have contribution in the second half. When we didn't get the contribution in the first half, we adjusted our Water Transport outlook. We tried to overdrive the other businesses to get back on plan. And therefore, we are now telling you, we don't think that, that's...

That's not happening.

That's not going to happen.

Because of the revenue. I mean, we were encouraged when we saw some of these projects getting released and that's why we're talked about the oil sands. We talked -- we saw some of these things getting released. We were getting excited about them and then we see them all pushed to the right. We just -- it's -- I don't -- just not going to comment on stuff until they happen.

And your next question comes from the line of Scott Graham from Jefferies.

The 2 questions that I have are when we talked about the step down on the 2005 -- 2015 target, it looks like you're only carving like 1 point or so out of the topline, yet $0.25 a share out of the bottom. Can you maybe walk us through that?

That's really, as 1.0 out of '14 -- it's a 1.5 out of '14. It's a 1.0 out of '15. It's the general bad news in missing the growth profile for 3 years running and the compounding of it.

That's fair. Okay. My only other question was really about the Valves business. So some of your wording, are you suggesting that your 2015 target is really devoid of the project business because you're kind of, I think as you said, kind of tired of waiting for it. Is that gravy to the $4.50?

Well, I mean, these -- this CapEx pushing to the right affects Valves & Controls. It affects -- it, really, it affects 3 out of our 4 segments. But it really effects Valves & Controls and it really effects Technical Solutions. The big number, the big project that I was referring to really wanting to sort of fill in the upside to what we're saying are the thermal ones. There's some big Valves & Controls ones, too, that are -- would also be a risk of sliding, but Valves & Controls is thousands of projects. And so with the -- the law of large numbers helps us a little bit of that. In Thermal, they've had some really large, large projects that we were all excited about starting on and they're on ice.

That's -- I get that. And I actually did have one last one I wanted to squeeze in, just on the -- based on the December Analyst Meeting you guys typically have, maybe it's November, whenever it's going to be, where were you really formalized your next year guidance. Randy, you're suggesting that $4.50 is sort of approximate, the final range that you give at that meeting could be higher, could be lower, or are you saying that your guidance will capture that number?

That will be my best guess right now. It could be higher. It could be lower. I mean, frankly, as I said, I can't go out and tell you anymore that I'm -- that I have a path to $5. I had to decide -- we had to decide, do we just take it away? Or do we give you some indication of what our best thinking is now? Obviously, our -- we weren't thinking -- it wasn't our best thinking that gave us $5, was it? I mean, so I think that would say that the $4.50 is our best guess right now based on what we know today. That's how I would want you to think about it.

And your next question comes from the line of Jeffrey Hammond from KeyBanc.

Just to kind of a follow on the large project. But Randy, more broadly, you mentioned kind of multiple degrees of freedom to hit the $5 and maybe now to hit the $4.50. And I'm assuming you're kind of talking about added buyback, kind of the $1.3 billion and the large projects and tax. Can you just talk about some of those levers that you can pull to kind of get you to the $4.50, or maybe nudge it above the $4.50 if the macro cooperates?

Yes, let's -- let me go back. Let me talk about it. I mean, that's exactly -- how we thought about the -- when we said that we were creating a business that had $5 of earnings power in 2015, when announced the merger on March 28, 2012. That was the takeaway on my last page. And when we thought about that $5, we said we believe we can overdrive synergies. We believe we're looking at a market, thought that should have really -- the economy should have rebounded really nicely and that'll be really good for Industrial and really good in Energy and we're going to clock some nice organic growth and we'll get drop through on that. And we have buyback. And we added all that up and we were comfortably above $5, right? And as the buyback, we were grateful that the stock responded to the early performance of the business and so the stock buyback didn't get quite as much impact because the stock price was higher. We did overdrive synergies. That was great. We had big disappointments in Water Transport, which we talked about. But also, Energy. And we really have underrun by 1% to 1.5% in '13 and '14 and now we think '15, what we really needed to have that great headroom above $5. So as we look at $4.50 and we came to that number, it's going to take another 1.5 -- more than 1.5 points of growth on the organic side to really help drive the topline, to drive above that number. Is that possible? I think it's possible. But we need less uncertainty in the world. We need more commitment to capital. We need some of these animal spirits of the economy to come to the floor. And look at the profitability we have. We're building in Valves & Controls and we have in our Technical Solutions business. We need organic growth. We will mint money when we get it. So I'm very focused right now. And that's one of the reasons why Water Transport, God bless the people in it, put them aside and focus everybody else on driving growth. Now we have the $700 million that's already approved in stock buyback. I'm committed to that. And we've got this other $1.3 billion. But how we use that $1.3 billion is to create shareholder value. And it could be stock buyback. It could be acquisitions. And we're going to look at all of it. So that's how we think about it. It's the way we thought about it when we put the businesses together. And I think our prospects as a company are every bit as good as they were. And we're going to exploit the ones we can capture.

Okay. Perfect. That's very helpful. Just a couple of clarifications. Process margins in 3Q look a little bit light. What's going on there? And how do think about tax x Water? I'm kind of...

The process margins, real quickly, is we do have some systems that we're beginning to ship and especially in our filtration processes. And so when we ship those systems, we generally get a little less margin. We do them for the aftermarket revenue of the membrane annuity stream. So every once in a while, we're going to have some lumpiness with the project margins in that business. Everything else is as is. And on the tax rate side, we continue to do all the right actions to benefit from the global structure that Randy mentioned in the OMT. We also have a similar project that were leading in Technical Solutions.

And I think, yes, the Water Transport x doesn't affect tax.

We're not expecting that to dramatically impact our tax rate, Jeff.

And you next question comes from the line of Christopher Glynn from Oppenheimer. Christopher Glynn - Oppenheimer & Co. Inc., Research Division: A little more on the process margins. I -- Fourth quarter implies snapping back pretty quickly. So it sounds like the mix impact is pretty localized in the third quarter.

Yes. Keep in mind that our product systems business is generally a stronger-margin business right now than the Filtration & Processing. And so they have a strong Q2. They have lighter Q3 and then they usually have a stronger Q4. So the contribution for Aquatic Systems within the Process Technologies side versus the contribution from Filtration & Process also has an impact on the overall segment margins. Christopher Glynn - Oppenheimer & Co. Inc., Research Division: Okay. Great. And in terms of realizing value for Water Transport, you're exiting it at a pretty high bottom. Could you just comment on the timing a little bit?

Well, I mean, that was the early comment about the hard to sell an empty bag, an empty shopping bag. It's also not worth carrying around forever. So we showed you the evaluation of the deal economics as we see it today, one of the charts that John showed. And that basically is assuming modest value for that. So those multiples of how everybody, all the shareholders involved here, did very, very well with this acquisition, assumes we get a realistic number for Water Transport. Let me leave it at that. Christopher Glynn - Oppenheimer & Co. Inc., Research Division: Okay. And I heard a fair amount of companies saying the oil sands is picking up. You said sliding to the right, but also said you're seeing some pickup in the orders there. So how would you characterize that?

It's the releases against the orders that we need because we don't -- until we ship something, we can't bill it. And we can't make it until they release the order. And that's what really has me shaken because I've seen it slip 3 times and it's baseball season.

[Operator Instructions] And your next question comes from the line of Hamzah Mazari from Credit Suisse. Hamzah Mazari - Crédit Suisse AG, Research Division: You folks talked a lot about projects getting pushed to the right. Maybe give us a sense of, within the Energy, as well as in Industrial vertical, how much of your business would you say is tied to growth or discretionary CapEx versus maintenance? Any color around that will be helpful.

Yes, I mean, I think we gave you a rough percentage. I mean, our installed base is obviously substantially higher than what our greenfield projects would be. So with any given quarter, we're looking at about 50% to 60% our revenue comes from serving what we would say is the general installed base. And it's not like we're a project-dependent business. We're more CapEx-dependent. And this CapEx in these Energy spaces usually continues to flow. Right now, we're in about 2 or 3 years straight of that amount of capital being reduced or being timed, as Randy said. Our belief is that there's not a great fear of inflation so there's no sense of urgency to put the projects in motion.

Or in effect, the bids and rebids, they keep getting lower prices. So that's why they keep them in rebid.

So what we're really referring to is we're not counting or hoping, because hope is not a great plan, on any large, unique bluebird projects that may or may not be coming into the forecast. Hamzah Mazari - Crédit Suisse AG, Research Division: Great. And just a follow-up, any color you can give around North American residential markets? Are you seeing any pause there or continued momentum in your business?

I would say, we have, we've got the 3 businesses that serve. We have the Aquatics business, we have Residential pump and we have the Residential Filtration business. And in the pro channel, Residential Flow, we've got some modest growth, but nice growth. It's masked by the exit of the retail side that we've talked about. And Residential Filtration is growing, again, single digits. Not exciting, but decent, not quite mid-singles, but -- and then Aquatics continues to do well with the share gain and the energy savings and the leading product lines and the best sales force. So that's pretty high. And that's continued. I see it as pretty steady. And the thing that really drives, certainly, the Residential Filtration and the Aquatics business is people putting money into homes. It isn't just housing starts, it's actually investments, if you will, in the housing stock. And so we -- it's been pretty stable for the 3 or 4 quarters of growth and even for a couple of businesses longer than that. And so we've actually seen in a couple of markets, where we think the markets can be stronger if there were -- if contractors could actually hire skilled labor. There's skilled labor shortage in some of the crafts in some areas of the country. It's affected our pool business and I think it's affected some of the remodeling business as well. On the pump side, it's really good for all of our pump players when -- the well pumps, so homes being built. When communities are being opened up and when larger homes built outside, they have the most pump content. Most of the housing that's being done is multifamily. So it has a more muted benefit to the Residential business when you have multifamily housing tighter to the city. That's probably too long an answer. Sorry.

And your next question comes from the line of Brian Konigsberg from Vertical Research.

Coming to just the lock on the free cash flow and the buyback and everything else. You did keep your free cash flow estimate despite the fact that you are taking operating profit down between now and 2015, I think about maybe $100 million. So a little bit less on that income line, but maybe just talk about what the bridge is. Are you getting better working capital performance out of -- versus your original plan? It would be helpful to get some detail there.

Yes, the -- I think the original forecast did not include any real contribution from working capital. And yes, we are performing better in working capital. And yes, we continue to feel confident about achieving greater than 110% of net income. So I think it was really more of a conservative first look at the cash flow. And generally our forecast right now is what the see and therefore, what we shared with you.

Okay. And that's mostly on the Valves & Controls side of the business or is it coming elsewhere?

No. Valves & Controls would be the primary contributor.

Yes. But we have -- in our Process Technologies business, we have a lot of opportunity. We really have opportunity on working capital in all of our businesses, but Valves & Controls is a big one.

Got you. And just secondly, just on the Valves & Controls and the outlook. I mean, we actually have been hearing, I guess it's been mixed, but generally positive data points on orders our pumps related to oil and gas and other projects. And typically, you do see the Valves follow that by a couple of quarters. So most of the pump guys have been, I guess, giving a little bit more confidence that things are starting to happen. I guess, why are you being so conservative in that case if you do see the leading indicators actually starting to improve?

I think as Randy mentioned, we're optimistic that we can see a couple more quarters of sustained order growth. Our Q2 reflected a pretty solid order quarter and we're hopeful Q3 and Q4. But we're now in the point of the cycle where if we book the orders and the valve is processed, we're looking at 2015 shipments. So what we're reflecting right now in the 2014 forecast is our shippable backlog, plus what we believe we can get to the book and ship and get out by the end of the year. We're hopeful that -- we looked at that same days that you did and that is the right leading indicator. And we're hopeful that we see those order start to come in Valves space and that would set up a nice 2015.

And can you just touch on the pricing of some of the emerging projects that are coming to market? Is it more competitive, or is it holding fairly stable?

I don't think there's anything -- there's nothing surprising or any kind of large move that I have seen in pricing. I mentioned earlier about a lot of rebids that are happening in the Energy business. That's really for the whole project. It didn't really affect our scope of the projects. But some of these huge, huge, $10 billion projects, they want to cut $1 billion out. That comes from redesigning the plan and doing things differently. So that's what I was referring to there.

And there are no further questions at this time.

All right. Thank you, all. You can give the replay. Things for listening in.

Ladies and gentlemen, the encore playback will be available 2 hours after call end time. To access this, dial (855) 859-2056. You will then be asked for your conference ID number, 66099974. Thank you. And this concludes today's conference call. You may now disconnect.