Good morning. My name is Scott and I will be your conference operator today. At this time, I would like to welcome everyone to the Pentair Q3 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. Jim Lucas, Vice President of Investor Relations, you may begin your conference.

Thanks, Scott, and welcome to Pentair's Third Quarter 2016 Earnings Conference Call. We're glad you can join us. I'm Jim Lucas, Vice President of Investor Relations and Strategic Planning. 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 third quarter 2016 performance as well as our fourth quarter and full-year 2016 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 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. Any references to 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. I would like to request that you limit your questions to one and a follow-up in order to ensure everyone an opportunity to ask their questions. I will now turn the call over to Randy.

Thanks, Jim, and thank you all for joining us today. I'll be starting on slide 4. We delivered third quarter results that operationally met the high end of our forecast and were slightly above our guidance as a result of anticipated separation costs that did not materialize. While two of our three segments did not deliver core sales growth as a result of continued slow industrial spending, the margin performance overall is a testament to our strong discipline around cost management. We announced in August that we reached an agreement to sell our Valves & Controls business to Emerson. This transaction is on track to close at the end of this year or early next year, subject to regulatory approvals. We're not expecting any recovery in industrial capital or maintenance spending at the end of the year in contrast to the typical year-end lift. Given this muted top line outlook predominantly on industrial-facing businesses, we're lower our fourth quarter outlook. We do not believe the fourth quarter is indicative of a trend, and we expect at some point maintenance spending will return in a more meaningful way. And longer cycle projects, particularly in food and beverage and infrastructure, are also likely to break loose. As we look ahead to 2017, we believe we are positioned to deliver strong EPS expansion despite this ongoing slower growth environment. I'll discuss this in more detail later in the call. Now let's turn to slide five for discussion of our Q3 2016 results. Third quarter core sales decline 2% as we saw further slowdown in capital spending throughout the quarter and ongoing referrals deferrals in maintenance spending. Water Quality Systems was our only segment to deliver core growth as the pool business once again finished the season in a strong position. We reached the…

Thank you, Randy. Please turn to slide number 10, titled Q4 2016 Pentair outlook. For the fourth quarter, ERICO is now captured in the core results, so core sales and total sales are currently equal to each other. For the fourth quarter, we expect overall sales to decline approximately 6%, as we expect MRO trends in energy and customer capital spending in all verticals to worsen as we head into the end of the year. Motivation for customers to push our projects and commitments shows no signs of stopping by the end of the year. On a core basis, we expect Water Quality Systems to grow approximately 2%, while we expect Flow & Filtration Solutions to decline approximately 9%, primarily related to project spending in the food and beverage vertical. Technical Solutions is expected to decline approximately 10%, due in large part to the completion of previously mentioned large Canadian projects and mid-teens declines in year-over-year MRO spending within energy. We expect segment income to be down approximately 10%, and return on sales to decline roughly 70 basis points to 17%. Below the operating line, we continue to expect the tax rate to remain around 21.5%, net interest and other to approximate $35 million, and shares outstanding to be around 184 million, about flat with Q3 ending levels. We expect free cash flow to end the year on a strong note, greater than continuing operations net income of $550 million and nearly $780 million inclusive of Valves & Controls. Please turn to slide 11, labeled full year 2016 Pentair outlook. As Randy mentioned at the beginning of the call, we've taken our full-year adjusted EPS outlook for continuing operations down to approximately $3 for 2016. For the full year, we expect core sales to decline 1%. Water Quality Systems full-year…

I'll wrap up beginning on slide 13. As I mentioned at the beginning of the call, the sale of Valves & Controls remains on track to close at the end of this year or early next year, subject to the regulatory approvals. With the closing and the Valves & Controls separation, we expect the infusion of cash to alter our balance sheet dramatically for the better. As we discussed in August, we know what debt we will retire, mostly within our bank line. We're also exploring other options to restructure our debt, substantially reduce interest expense on our higher cost fixed rate long-term debt. We also continue to build our bolt-on acquisition funnel for businesses that have earned the right to grow, primarily within Water Quality Systems. We're doing what we can to control our destiny and while we still see some pockets of growth within residential and commercial and infrastructure, the uncertainty around any type of recovery within industrial gives us pause. So we're taking a closer look at our cost structure and adjusting it accordingly. Now, let's move to slide 14 for a look at segment positioning. Water Quality Systems has been a bright spot within the Pentair portfolio for several years, and while we've seen the growth rate moderate some, we continue to believe in the long-term prospects of this high-performing segment. With strong residential demand, dealer intimacy and a steady stream of new products, our outlook for the aquatics business remains strong. Within water filtration, we continue to believe we will benefit from increased awareness around water quality globally, and our investments in a more focused sales effort in North America and Europe are already paying early dividends. Foodservice has been a relatively consistent growth business for us longer term. We continue to believe there are…

Your first question comes from the line of Shannon O'Callaghan from UBS. Your line is open.

Good morning, guys.

Good morning, Shannon.

Good morning, Shannon.

Hey, so, just on kind of the 4Q caution, I mean, is there anything in October that's making you think we've seen yet another like down or you just, is this lack of inflection, concerns around election – maybe just a little more color on what keeps you cautious on 4Q? And I know you're more optimistic beyond 4Q.

Yeah, Shannon. It's John here. I think what, if you take a look at Q3, we started out really strong and we ended okay, but we certainly didn't see acceleration towards the end of Q3. And what we're seeing is continued project slippage, where these are projects that we've either won, but the start dates on the projects continue to move to the right. And given where we are right now, with all the uncertainty you mentioned, we just don't think our customers are going to rush to conclude them between now and the end of the year. The other main issue is we've been hoping that MRO would recover throughout this year and that's on the operational side, primarily in energy, and we're not hopeful now at this point that that's going to recover for the end of the year as our customers manage cash to the end of the balance sheets. So, those are the main issues.

Yeah. We almost always see an uptick in the industrial spending in the fourth quarter and what we're saying is, we're not counting on that this time, with these deferrals.

Okay. And then just, in terms of all segments improving margins next year, the one that's been a little bit tougher has been Flow & Filtration, maybe just an update on how you think they're progressing operationally? I know volumes were a little tougher this quarter, but what – do you have confidence that segment can improve margins next year?

Yeah. If we had hit the forecast of down 2% instead of down 6%, we would have expanded margin. I think we're making a lot of progress on simplifying the product line and on driving productivity. It's a business that frankly didn't get as much attention as we focused on Valves & Controls and now we're getting back to it. So I think there's lots of opportunities and things like agriculture coming back, the crop spray business and some of the other businesses that are some of the more profitable businesses, those stabilizing and even getting a little bit of growth is going to help in the mix.

Okay. Great. Thanks, guys.

Your next question comes from the line of Steven Winoker from Bernstein. Your line is open. Steven Eric Winoker - Sanford C. Bernstein & Co. LLC: Thanks. Good morning, all.

Morning, Steve. Steven Eric Winoker - Sanford C. Bernstein & Co. LLC: Just first a quick question on ERICO. So I know it's not in core growth. What would that have contributed to core growth? What was just the ERICO core growth for that business?

1% to 2%, Steve. Steven Eric Winoker - Sanford C. Bernstein & Co. LLC: Okay. And just on Water Quality Systems, this was one of your strongest businesses that could do no wrong historically and clearly you had a forecast for 8% at least in terms of guidance, came in at just 2%. You talked about a couple of those dynamics, but maybe also for John, I mean where was the forecasting error here and in terms of that business that's supposed to be so much more stable.

I'll hit your last part first and then I'll have Randy. We had three key businesses in Water Quality. We have our aquatic and environmental systems, which is primarily the pool business. The pool business continues to be very strong and we continue to hit all of our forecasts relative to that business. Where the softness came in the quarter, which also relates to the way we're thinking about Q4 was in the foodservice business, which has been up, high single-digits throughout the year and had moderated back to flat in Q3. And then also we had the water purification business which also was strong most of the year and took a little bit of pause in Q3. So that's where the misses came, Steve.

Yeah. I'd just add, on the foodservice side, we've been growing at high teens rate in Asia, and while we're still growing there that took a step down to high single-digit growth rate, which was one change. And then we've seen some, I would call, variability in some of the deployments in some of the chains as restaurant growth has slowed down. So we expect those deployments to continue, or get positive again, as we launch a new range of products, which I referenced in my comments, but that won't happen in the quarter. Steven Eric Winoker - Sanford C. Bernstein & Co. LLC: Okay. And Randy, in terms of how you're thinking about M&A. You early on talked about those businesses that have – I guess, have earned the right to capital deployment soon – shortly after Valves & Controls closes. Maybe a little more guidance on how you're thinking about bolt-on, just any kind of size range or just a little bit of sense for investors of what we might expect early next year?

Well, we're going to be disciplined, I mean, we're getting out from under the overhang of a lot of the debt and we take our lessons from that, okay. But the place that we have the most opportunity. We are one of the leading players in water. We expanded that with the Tyco merger into the broader flow space and I think we want to get narrowly focused again in what I'll call the water side of the flow space. So, that's why I mentioned Water Quality. There are some that are sort of in between Water Quality and FFS, which is really, I mean, both of them together are our water business. And so, we want to continue to build that leading position and, so around water quality and availability. We like the food and beverage business, although we want to be careful about the heavy capital side of that versus things with annuity, which is why we like the membrane, the beer filtration, and also biogas, which is I think a nice growth business. So, it will be in areas that expand our reach and deepen our expertise in water – way to think about it. Steven Eric Winoker - Sanford C. Bernstein & Co. LLC: Okay. Great. Thanks a lot.

Your next question comes from the line of Mike Halloran from Robert Baird. Your line is open.

Hey. Morning, guys.

Morning, Mike.

So, first on 2017 thought process, obviously, no meaningful improvement embedded in those numbers. Yet I got the sense from some of your commentary more specifically on the divisions that there was some expectation that fourth quarter doesn't represent the right run rate. So, maybe help kind of reconcile those two right there and then what areas should start getting maybe a slightly better in the next year and which ones you're more worried about?

Let me start with Technical Solutions. We mentioned thermal. As the thermal business saw the decline in the energy business, we got aggressive in going after projects to replace the product. Those have proven to be more challenging from a profitability standpoint and those are coming to an end. And so, we'll immediately mix up, if you will, on the profit side. On the growth side, we expect more normalized. We're assuming in the fourth quarter this muted impact on the usual bump in sales we would see in industrial. We don't think – we're hopeful that after the fourth quarter, we'll return to a more normal level, which won't be the negative impact we see in the industrial market for the fourth quarter. John, if you want to add anything?

No. I agree with that.

So, you're basically saying beyond that, though, it's a pretty steady run rate from the fourth quarter other than the maintenance side reverting back to normal?

Yeah. If you take a look at the full year, core growth was down 1% for full year, that had a lot of choppiness in it. We started the year with almost double-digit declines in industrial. We've worked a way back to flattish numbers as we close out the year. So sequentially things have stabilized. What we're really saying is these larger projects that were out there for the Q4 cycle are going to be pushed or deferred into next year or may be deferred permanently. And we don't see me environment that's reflected in Q4 in the pause and concern of our overall customer base being the same cause of concern that we see as we enter 2017. Now, we said negative 2% to plus 2% next year so that's clearly not a robust growth environment, but it's flattish and then we have the operating income cost structure changes that we're driving as an organization to drive margin improvement.

And I would add as – and that's the framework. We're planning on a minus 2% to plus 2% top line, which means to drive the performance that we know we can drive, we need to focus on simplifying. We're already working on simplifying the cost structure with the removal of Valves & Controls. We're going to do more than that, as a result of that outlook. If we get more upside, we will be in a position to serve (26:22) on the volume side.

Makes sense. And then, second one on the stranded cost side, maybe just an update there on how that's going? And then, just with the margin levers in the next year, some sort of thought process on how much is discretionary oriented versus something more permanent?

Well, we're looking beyond just the stranded cost and we're looking at how do we simply the cost structure and, in a lean sense, how do we really take out waste and variability in the course of that simplification. I'm confident that we will get to a run rate at the beginning of the year that takes that overhang away or more.

Thank you, guys. Appreciate it.

Just follow on to Randy's point, real quickly. I mean, we had a focus to integrate and standardize a lot of the Valves & Controls activities, because that's where the biggest opportunities were for improvements. And so we repositioned a lot of our cost structure savings towards Valves & Controls. Now we're going to bring back the focus to reintegrating ourselves, if you will, to our Pentair standards on the rest of the portfolio, and we believe we can accelerate a lot of those cost-out actions in simplifying the company as Randy mentioned.

Thanks, guys.

Your next question comes from the line of Steve Tusa from JPMorgan. Your line is open.

Hi, guys. Good morning. Hey, how do you get so – you got the 5% operating profit increase, I guess 15% EPS growth. Just remind us kind of how you bridge that, I'm not sure if you mentioned early in the call and if you did then I guess I'll take it offline, but just a little more of a precise bridge on how you get there?

Yeah. We didn't, Steve, I mean, but I think the element we're now working to right now is we believe there is opportunity in the debt structure of the company. And we do think for relatively inexpensive investment, we can get a fair amount of interest out by putting our capital position or our debt position more in line with where we want it to be on a permanent basis. And there would clearly be significant interest savings associated with that, Steve.

Okay. So that's a refi or that's, I mean, because your interest rate, I think your average interest rate is pretty low already, right, or is there...

Right. We're carrying gross debt fairly high without taking out fixed debt structure and we think there's an opportunity to take out some of the fixed debt structure in a productive way and therefore it's incrementally better than what we had mentioned before. And we think we then have a capital and a debt structure that mirrors where we think we can be longer term as a growth oriented company.

I got it. So it's a kind of combination of use of the proceeds effectively and then a little bit of a different structure in the underlying.

Correct.

In what's leftover.

Correct, but no (29:07) buybacks or --

The 15% plus, think about it as one half on the capital side focused on debt, and one half on the performance side.

Okay. And then in Technical, what's going on in the core enclosures business? And is that decline in the fourth quarter, is that all thermal related? Is that just a tough comp on thermal because it doesn't seem like the enclosures business would have that kind of a drop-off from flat given the short cycle nature.

The profit impact is almost 80% thermal and usually in the enclosures business, that's the place where we would see a fourth quarter uptick and we're assuming we won't.

Okay. So that's within enclosures, though, like the kind of short cycle CapEx, the box business, is that stable down in that negative 10%? What is that kind of trending?

Bumping along the bottom...

It's stable, Steve, from Q3 sequential. The overall...

Okay. So, but down year-over-year, because you may have had a good fourth quarter last year, or something like that?

Slightly down year-over-year, but not 1% to 2% down.

Okay. I think that's it. Thanks a lot, guys.

Your next question comes from the line of Julian Mitchell from Credit Suisse. Your line is open. Ronnie Weiss - Credit Suisse Securities (USA) LLC (Broker): Hey, good morning, guys. It's Ronnie Weiss on for Julian.

Morning. Ronnie Weiss - Credit Suisse Securities (USA) LLC (Broker): Can you just talk a little bit about the pricing dynamics in each of the segments, still holding up decently well and how that kind of looks into 2017?

As you can see overall, pricing is – it's not moving a lot in either direction. We actually think with rates go up and inflation goes up a little bit, it'll give us some more pricing leverage. I mentioned in the script that in the thermal projects, that's been tougher on the project side. But we've seen the impact of that. Now, we're being more selective about going after them because we don't want to get low-profit projects anymore. Rather just get the products of it. So I'd say there's really no dramatic change in the pricing environment in any of the businesses. Ronnie Weiss - Credit Suisse Securities (USA) LLC (Broker): Okay. And then kind of on the accelerated alignment of the cost structure going into 2017, can you frame some of those numbers? Is the 50 basis points all productivity, is that 2% benefit that you guys had in Q3, is that the right number to think about into 2017, or does it step back up as you maybe see some more opportunity?

Yeah. I don't think we're ready to give our final number yet. I think the number that you mentioned, about 2% of sales, is certainly in the ballpark of where we're targeting as we head into next year. And obviously, being more selective at where we apply that cost out to where we think the economic conditions will not as robust as other places of the portfolio. But overall, you're in the ballpark. Ronnie Weiss - Credit Suisse Securities (USA) LLC (Broker): Great. Thanks, guys.

Your next question comes from the line of Joe Ritchie from Goldman Sachs. Your line is open. Joe Ritchie - Goldman Sachs & Co.: Hey, good morning, guys.

Good morning.

Hey, Joe. Joe Ritchie - Goldman Sachs & Co.: Hey, so, I was trying to follow the answer to Steve's question earlier on the fourth quarter in Technical Solutions. You guys have that stepping down organically 10%, so what exactly is driving that in the fourth quarter?

It's primarily all of our thermal business related to energy, MRO...

MRO.

And energy projects.

And a couple of points on enclosures. Joe Ritchie - Goldman Sachs & Co.: Got it. So, enclosures are going to be down, I think, low single-digits and thermal and the heat tracing business could be down more than double-digits in the fourth quarter?

Yeah, keep in mind that that's a year-over-year comparison, so last year we had projects roll through. So it's a comparison against the projects. If you actually look at it sequentially from Q3 to Q4, it's just down slightly on the top line. Joe Ritchie - Goldman Sachs & Co.: Got it. Okay. That makes sense. And then the second question is just around the ERICO business. I think you guys mentioned earlier that the annual run rate was about $507 million for this year. And then, I think the numbers that you gave us at the Analyst Day were closer like $530 million, $540 million. So what's happened in that business throughout the year and also maybe some commentary on recent trends there as well?

Yeah. I don't know where the $507 million came from, we think it's $530 million for the year, slightly better than $530 million for the year. So... Joe Ritchie - Goldman Sachs & Co.: Okay. Got it. So, basically that business is flat right now?

Slightly up.

Slightly up. Yeah. Joe Ritchie - Goldman Sachs & Co.: Okay.

Right in line with the plan. Joe Ritchie - Goldman Sachs & Co.: Okay. All right. Great. I'll get back in queue. Thank you.

Thank you.

Your next question comes from the line of Scott Graham from BMO Capital Markets. Your line is open.

Hi, good morning.

Good morning.

I was hoping to get underneath some of the inflation numbers here. Where exactly are you guys seeing inflation emerge?

Steel, starting to see some pickup in steel related pricing, as a material buy. We're also seeing some uptick in some of the commodity prices for mining related commodities, Scott.

All right.

We also have wage inflation, labor inflation.

Are there price increases set for the fourth quarter, given the steel situation or have they already occurred?

Yeah, as Randy said, we have modest increase as planned and they have already or will already have been in place this early quarter.

All right. And then I have one other more holistic question for you guys. This is the same portfolio as we kind of left off pre-Valves in 2012. And with of course the addition of ERICO, yet we seem to be talking a heck of a lot more about project business today than I really ever recalled in the older portfolio. What has happened to your businesses and the dynamics of the market where so much of your business now seems to be more project oriented? And if there's any way of quantifying how much of your businesses now project oriented now, versus what it was then, I guess sort of the last question within that would be, how does that affect your cost down plans for next year, project orientation makes that a little bit harder or otherwise?

Yeah. Let me – there are – it's not wrong. We do have more products – as we move from products to solutions, they tend to be larger, more complex and we call those projects and then of course the thermal business. We saw the thermal business and about half of that is projects, a little bit more than that because of the MRO, the product sales has been impacted. So we expect that the solutions sales can still give us the same amount of margins. We need to get better at predicting when they're going to shift. We need to make sure that we're getting the same margins we're getting as we move the products to solutions and that's all underway. So strategically it's where we were going anyway because it's where customers want us to become. So there are projects in both Technical Solutions and in FSS.

Yeah and the total would be roughly just under 8% of sales – would be our total project revenue for 2016.

But a lot of the variability. That's why we need to get better at predicting.

Right.

And would you say that is maybe double or more what it was pre-Valves & Controls?

Probably, yes.

All right and does that affect how you pull cost out next year?

It doesn't because the way we look at it is most of that is variable spend, right. So we flex it up and flex it down and so we look at that and as we referenced cost out targets, it's those targets plus what needs to go away related to the project.

I got you. All right, very good. Thanks a lot.

Thank you.

Your next question comes from the line of Nathan Jones from Stifel. Your line is open. Nathan Jones - Stifel, Nicolaus & Co., Inc.: Morning, everyone.

Morning.

Hey, Nathan. Nathan Jones - Stifel, Nicolaus & Co., Inc.: I'd just like to follow up, John, on the point you just made about increasing prices in the fourth quarter. Can you maybe give us an idea of historically how much of that pricing sticks and given that we're in a pretty weak demand environment at the moment, if you think that pricing increase will be more or less sticky than it historically has been?

We think that the price increases that we put forward which are more modest price increases will all generally stick. There's only one area of our particular portfolio right now that's unusual versus prior trends and I'd call it the strengthening dollar, right. So...

Right.

We're in a situation where Europe and you heard it in Randy's commentary, Europe's doing relatively okay. So there are imports coming from Europe that are realizing lower cost basis. Now we have European business as well that we're benefiting from that. But overall, I think we put in a net price increase, modest less than 100 basis points for the total company, next year that we think we can realize. Nathan Jones - Stifel, Nicolaus & Co., Inc.: Okay. That's helpful. Next question, you talked about I think this call and last call about industrial order rates being at trough levels. But your guidance on that end market there has taken a step down this quarter. Can you reconcile those? Have the order rates taken a step down and now you think they're at trough levels and what gives you confidence that maybe there's not another step down to come from here?

Yeah. Actually it's flat. I mean, the thing is in my 20 years or 30 years in industrial, I'd say 19 out of the 20, there's been an uptick in the fourth quarter and we're saying is that doesn't happen. So we're flat essentially in the third quarter and fourth quarter, and compared to last year, that's down a couple points. Nathan Jones - Stifel, Nicolaus & Co., Inc.: But what gives you confidence that that improves going into 2017? I mean, on a year-over-year basis, we've taken a fairly significant downtick in the fourth quarter, even if it's flat sequentially?

Well, ISM actually went positive in September, that's only one month. We'll see what it does in October. It's usually a precursor of recovery and...

But, Nathan, just to be clear, I think our framework, not guidance, but our framework for next year doesn't assume it does, and I think that's what we hope you took away. That, yes, we think Q4 is an anomaly, but if you take a look at the overall core growth for the company at negative 1% and moving to that general framework next year, I don't think we're counting on a big recovery next year. We think it's a slower economic growth environment and we're going to double down on the simplicity of the company, work on the debt restructuring and disciplined capital allocation to drive the value. Nathan Jones - Stifel, Nicolaus & Co., Inc.: Okay. That's fair. Thanks very much.

Hope we're wrong, but I don't... Nathan Jones - Stifel, Nicolaus & Co., Inc.: Hopefully not wrong in the wrong direction. Hopefully wrong in the right direction.

There you go. There you go.

Your next question comes from the line of John Walsh from Vertical Research Partners. Your line is open.

Hi, good morning.

Morning.

Morning.

I didn't see it on the slide, but just wanted to talk about free cash flow conversion to the adjusted net income for the next year and what some of the levers are you have to pull to keep the conversion rate really strong, whether it's CapEx or working capital or any other items to be aware of on the cash side.

We think on a go-forward basis, we're still targeting to achieve greater than 100%. While we've lost some of the working capital opportunity in Valves & Controls, we still have plenty of working capital opportunity in FFS, and we also believe we have a less severance environment, right. So, our cash flow captures our severance outflows as well, and there were a fair amount of those in the Valves & Controls business that as we move away from Valves & Controls no longer are headwinds to the company. So we still think 100% or greater than 100% of net income is our targeted cash flow conversion.

Which is what we did before the Tyco merger on a regular basis, so...

Yeah. And then just wondering if you can give us an update on the valuations that you're seeing out there on the deal front, kind of seller and buyer expectations are getting tighter and if it's kind of still a – I don't want to put words in your mouth, but it seemed like it was kind of evenly split between preference for share repo and M&A when you did the Valves & Controls call?

Yeah, when we did that, we said we're going to have this firepower. We are about shareholder value and we will as a board look at the opportunities of how we deploy that. Our bias is to grow the business and grow the company, but we're not going to do it with non-strategic acquisitions. So if we can't find them at the right price, and it's hard to generalize as to pricing, but there's a lot of people looking at deals, so usually that causes prices to go up. But we have been disciplined, and we will continue to be disciplined as we look at it. And we're not rushing to put the capital to work. We want it to be informed by a good strategy, and the board is totally aligned on that.

All right. Thank you.

Thank you.

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

Hey, guys. Just another one on M&A. I think, Randy, your comments were much more focused on Water ,and I think you've talked in the past about both Tech Solutions and Water having the right to grow, so kind of what informs that bias? Is it what's available out there or how you're thinking about the businesses strategically or the end markets? Maybe just a little more color there.

Well, Technical Solutions has to get back to earning again. I'm not happy with the forecast that we got on the thermal side. So we want to support high execution. So there are opportunities in Technical Solutions. It's a great business. I mean, as I mentioned in the script, we have great positions in the electrical industry and there are ways to build upon those, but we need to get the cost structure in that business right. We need to get the execution back to where I know it can be, and then I'll let them come up to the front of the line again.

Okay. And then, John, just back on the debt restructuring. So this ability to restructure some of the debt -- that is built into the guide? Is that the right way to think about it?

The framework.

Yes. We haven't given guidance yet.

Into the framework, yes. Okay. So you're putting that in and are you paying down more – within that framework, are you paying down more debt or you're just getting a more favorable rate based on a restructuring?

We will be paying down more debt. I don't what yet, we're still exploring it, but given our original views, we quickly after the Valves & Controls hadn't had time to look at it.

Right.

We're now looking at it and we're seeing that for a very good return, we can invest a little bit of money and get a longer term savings. So we're looking at exploring those options and when we give our guidance, we'll be able to fully share that. But right now we're anticipating it's better than we previously said.

Okay. Thanks, guys.

Thank you.

Your next question comes from the line of Joshua Pokrzywinski from Buckingham Research Group. Your line is open.

Hi, good morning, guys.

Hey, Josh.

Yeah. Just to follow up on I think Steve's earlier question on ERICO. I guess I'm still struggling a little bit with the plug there. I'm looking at the slides from when you guys initially did the deal, $570 million in 2015, $595 million in 2016 forecasted revenue. And it still seems like even with some margin error or maybe some reporting differences, we're still talking about a number in the low $500 million range, whether it's $507 million or $530 million. What am I missing in that bridge?

Yeah. So, thanks for bringing it up. Those original numbers were gross sales.

Gross sales.

They're not net sales. And on a net sales basis, we're closer to the $530 million this year and that is roughly a 1 to 2 percentage point growth over where it was on a full year basis last year. It is made up of – roughly half of that is CADDY, which is a commercially exposed business, and then half of it is more related to infrastructure and also rail and utilities. So the big difference in those original slides to what we published later was gross to net deductions.

Got you. And the just to circle back on Flow & Filtration, clearly you guys have a lot of initiatives going on there all at once and the market certainly not helping you out, but what should we expect to see first when you're starting to get traction there? Is it organic growth stabilizing, is it margin improvement, is it a little bit of everything? Because I think you guys have been focused on this for at least the last year and clearly at a high level things are still probably disappointing to you, but I'm trying to figure out what would be the green shoots from your perspective that you'd want people to look at and say, hey, we're starting to get some traction here?

Yeah. I would say margins and, Josh, go back two or three years, we were making some good – FFS was, if you will, in the legacy venture side, it was the lowest performing margins and our goal was to get it to 15% or more. I still think we can get them there and we get close at some point. And so you'll see it in our margins first and then growth. So right now we actually have, as I said, some of our innovations like biogas and membrane filtration of beer, even though general the food and beverage industry isn't growing, these applications are and we're doing well in them. So we are getting good progress in a number of growth areas, it's just not enough to offset some of the areas that aren't growing. So margins first, growth second.

To be fair, though, Randy, the 15% target, that was inclusive of AMR (47:10), right, the way you guys used to report it, or is that wrong?

I'd say, yeah. In addition though (47:18)

The margins in Flow & Filtration should approach what they are in Water Quality. I mean these are some high technical specs. I mean, I don't think we'll get our core pump business that high, but the filtration side of this business and the technology side of the business has a lot more potential than 15%.

Got you. All right. Thanks, guys.

Your next question comes from the line of Robert Barry from Susquehanna. Your line is open.

Hey, guys, good morning.

Good morning.

So the talk about the large beverage projects being pushed out, is that beer and is that related to M&A or just maybe a little more color on what's happening there?

It's basically the valving in all beverage, it's dairy, it's beer, but the biggest ones for us in beer.

Yes, and there is a capital pause happening, as you mentioned, that's driving some of that delay.

Related to M&A activity, I know you've talked about that before.

Yes.

And so when you talk about the beverage projects, should we think about that bucket of revenue, is that about $350 million of sales that's kind of...

No.

$250-ish million.

Yes.

$250 million. Got you. Okay. And maybe just to put a finer point on some of the earlier questions about the framework for next year. I mean what should we plug in our models for 2017 for interest expense and corporate?

Not there yet. We have to get through and figure out where we end and then we'll give guidance at the appropriate time. We just wanted to provide the framework so that people can understand how we're thinking about it.

I mean the corporate sounded like maybe it would go back to the 90 (48:47) that it was the pre the V&C sale or maybe even a little lower. Is that kind of ballpark?

I think that would be the low end of the range.

Got you. And then maybe just finally in Tech Solutions, you talked about some of the productivity issues with the big projects. I mean in the quarter and maybe year-to-date how much of a drag on the margin has the thermal project productivity issue been?

300 basis points.

Okay. So when we're looking year-over-year, that's like a 3 point headwind that's just going away?

That's correct.

For the segment?

That's correct.

Got you. Okay. Thank you.

Thank you.

There are no further questions at this time. I'll turn the call back over to the presenters.

Thank you very much. And I'm sure it will be on replay. Thank you. Bye.