Kathryn H. White Vanek - Vice President of Investor Relations John F. Lundgren - Chief Executive Officer, President, Director and Chairman of Executive Committee James M. Loree - Chief Operating Officer and Executive Vice President Donald Allan - Chief Financial Officer and Senior Vice President

Jason Feldman - UBS Investment Bank, Research Division Michael Jason Rehaut - JP Morgan Chase & Co, Research Division Eric Bosshard - Cleveland Research Company Daniel Oppenheim - Crédit Suisse AG, Research Division Nicole DeBlase - Morgan Stanley, Research Division Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division Michael J. Wherley - Janney Montgomery Scott LLC, Research Division Mike Wood - Macquarie Research Dennis McGill - Zelman & Associates, Research Division Sam Darkatsh - Raymond James & Associates, Inc., Research Division Richard M. Kwas - Wells Fargo Securities, LLC, Research Division Michael Kim - Imperial Capital, LLC, Research Division Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division

Welcome to the Q3 2012 Stanley Black & Decker, Inc. Earnings Conference Call. My name is Sandra, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Vice President of Investor Relations, Kate Vanek. Ms. Vanek, you may begin.

Thank you, Sandra. Good morning, everyone. Thank you all for joining us today for Stanley Black & Decker's Third Quarter 2012 Conference Call. On the call, in addition to myself, is John Lundgren, President and CEO; Jim Loree, Executive Vice President and COO; and Don Allan, Senior Vice President and CFO. Our earnings release, which was issued this morning, and a supplemental presentation, which we will refer to on the call, are available on the IR portion of our website, as well as via the webcast, and also on our iPhone and iPad app. A replay of the call will begin today at 2:00 p.m. The replay number and access code are in our press release. This morning, John, Jim and Don will review Stanley's 2012 third quarter results and various other topical matters, followed by a Q&A session. [Operator Instructions] And as always, please feel free to contact me with any follow-up questions after the call. And as I normally have to do, we will be making some forward-looking statements during this call. Such statements are based on assumptions of future events that may not prove to be accurate, and as such, they involve risk and uncertainty. It is therefore possible that actual results may differ materially from any forward-looking statements that we make today. We direct you to the cautionary statements in the 8-K that we filed with our press release and in our most recent '34 Act. With that, I will now turn the call over to our CEO, John Lundgren.

Thanks, Kate. Good morning, everybody. And for those of you have been able to read the press release this morning, hopefully, you've taken away from it that our focus does remain on driving long-term growth and achieving our mid-decade vision of being a $15 billion-revenue company with 15% operating margins, irrespective of the macroeconomic backdrop. What we're going to try to cover this morning is what we're doing to counter some of the headwinds in the marketplace in an effort to essentially determine our own destiny, drive organic growth in the face of relatively flat developed markets through, among other things, an increased focus in emerging markets and some, I think, very, very exciting programs in well-developed markets. Revenues in the third quarter did increase 6% year-on-year to $2.8 billion. Organic revenues were flat. CDIY grew 4% organically with an operating margin rate, excluding charges, of 15.8%. That is the highest operating margin rate we've been able to achieve since the merger of Stanley Black & Decker almost 3 years ago. Industrial and Security were both pressured by certain weak end markets and particularly, Europe. And to counter some of those, you're going to hear a lot from Jim a little later on in his presentation about some of the investments and organic growth initiatives that have already begun and will carry on throughout the next 12 to 24 months. Our third quarter diluted earnings per share was $1.40. Again, that's excluding charge of $0.69 GAAP EPS, including all the charges we do in the appendix of this presentation have a detailed definition and explanation of what's in the charges. The Niscayah integration continues to go well, operating margins to exceed 12% this year when it's finished. That's up 500 basis points from fiscal year '11, shortly less than --…

Okay. Thanks, John. I'll move through the segments fairly quickly today as the story is relatively clear, and I'd like to spend more time outlining the details of our new organic growth initiatives, which will enable us to achieve our long-term objectives with no help from the environment. Starting with CDIY. CDIY had a respectable organic growth quarter with impressive margin rate expansion. Revenues totaled $1.38 billion, up 3%. The OM rate was record 15.8%, up 260 basis points versus a year ago. Organic growth was up 4%, with unit volume up by the same percentage. The majority of OM rate accretion was driven by merger synergies, volume leverage and variable cost productivity. Along geographic axis, mid-teens organic growth in Latin America once again more than offset EMEA, which was flat, latter a laudable achievement given weak margin conditions, especially in Southern Europe. The U.S. was up 5% organically. Sales by product line were solid as Professional Power Tools were up 5%, Consumer up 4% and Tools Fastening up 5%. Each subsegment had its own success drivers to overcome what was on balance a tepid market environment. Professional Tools continued to exploit its ongoing cordless launch success. Consumer enjoyed growing momentum from its highly innovative Gyro and Matrix product introductions. And Tools and Fastening benefited from Latin America revenue synergies and the DeWalt Hand Tool launch. Looking forward, we expect continued solid organic growth performance in the segment despite ongoing external market issues. And we also expect the fourth quarter margin rate to hold in the same zip code as in the third quarter. Now moving to Security. Security margin rates continued strong sequential progression as Niscayah synergies are realized. Security revenues totaled $790 million, up 22%. The OM rate was 16.5% and 18.8% excluding Niscayah. The operating margin rate,…

Thank you, Jim. Before I move to the 2012 outlook, I just want to touch on free cash flow on Page 14. As you can see, our free cash flow for the third quarter was approximately $170 million; and year-to-date, almost $465 million. For those of you who are familiar with the trends and the seasonality of our working capital and cash flow, you're well aware that a large part of our cash flow does occur in the fourth quarter of each calendar year. And so in this particular case, the working capital through 9 months, or September 30 of this year, is a negative of $286 million. So it's a little larger than we would normally see in this time frame, but, however, it is on track with our expectations because we do believe that we will be at somewhere between 7.5 and 8 turns by the end of this year. And as a result, we'll see anywhere from $400 million to $500 million of free cash flow in the fourth quarter just from working capital, pretty much in line with our expectations, as well as the seasonality that does occur, had met a large part of the revenue, in particular, in our CDIY business occurs in the month of October and into early stages of November. And then it slows down in the month of December, which allows for reductions of inventory, as well as collection of many of our receivables within -- or by the end of the fourth quarter. Another thing to keep in mind as you look at the trending and where we are through 9 months is if you look back in history, I've reminded folks of this over the last few years, is that fourth quarter tends to represent anywhere from 50% to…

[Operator Instructions] The first question is from Jason Feldman from UBS.

First, just briefly, I understand it's early for you to be willing to comment on organic growth. But on the headwinds and tailwinds for 2013, there were 2 that were absent that I would have expected. One is FX headwinds based on current rates, kind of what you think that could be -- at least, in the first half, I would expect kind of some sort of modest headwind? And also I think you touched about AeroScout and Powers Fasteners being accretive next year to some degree or another. I think it was $0.10.

I would say the FX components, actually, were pretty much back to the level we experienced early in the year for most of the major currencies. So we don't see a lot of FX headwinds based on current rates going in 2013. As far as the other acquisitions, I would say, yes, they're kind of in the net neutral category. We didn't call them out because it's a relatively small number, but when you look at the impact of commodity deflation, the mix headwind and those acquisitions, they'd all be in that kind of bottom category that I called net neutral.

The next question is from Michael Rehaut from JPMorgan. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: Really appreciate all the comments and detail. I had a question about the emerging markets strategy. You mentioned that the 2012e [ph] was also pro forma for Infastech. It looks like that Infastech revenues, and I believe you said Asia Pac was about $270 million or so, are there any other acquisitions in that number? I'm trying to get to the organic growth number. And I guess, looking forward, as you continue to expect to build that business, I assume there'd be -- it would be good contribution from acquisitions as well as organic growth.

Yes, I mean, the numbers are pro forma. So the -- whatever Infastech was in 2012 would be in the base as well. And as far as the acquisition strategy for Stanley right now, it is almost exclusively on emerging markets. And we tend to be looking for power tool, hand tool, commercial hardware and Electronic Security acquisitions, which are very relatively small, in most cases, less than $100 million but very strategic on a one-off basis in a given market. We really feel that some of these companies have strong local distribution, which when combined with our product and manufacturing expertise that we're developing, or the manufacturing expertise that we have and the product expertise in the emerging markets that we're developing, can be very powerful. So yes, it will be supplemented through some acquisition. None of that is included in the organic growth rate numbers that I shared, obviously, that would be in incremental to that.

And Mike, this is John. Just so you don't get cut off, I mean, Jim referenced a plant acquisition, which was really a manufacturing base in India. That's a good example of the kind of thing Jim's talking about. And collectively, we have spent a lot of time on target identification and development. Jim has spent, with mine and Don's and our board's full support, a tremendous amount of his time focused on emerging markets in the last 3 to 6 months because, as you know, these relationships, large or small, have a far longer incubation period than, say, a North American acquisition. So that's all part of the thought process. But importantly, the focus is in emerging markets on business development but it's small. Our hiatus on significant acquisition activity going forward remains, because we're going to focus on organic growth. And as I said, we're going to run it. I think Jim explained it really well, we're going to run it like we run a large integration, because that's a model that's tested and proven within our 4 walls, and it looks well for us.

The next question is from Eric Bosshard from Cleveland Research.

The CDIY growth number was in line, a good performance. Can you just give us a little more color on what you're seeing in that market in the U.S. in terms of growth, in terms of your share performance, in terms of price competition and promotions, just a little more color on what you're seeing in that important business?

Yes, basically, I think, we're outperforming the market, for sure, in the U.S. Probably, market may be up 1 to 2 points at this point, and, I think, given our performance, a couple of points higher than that. Most of it is coming from the things that I referenced, the cordless, in particular, in Professional Power Tools and to some extent in CPG. But also the -- now we're getting the introduction of the very innovative products that we have in CPG, the Matrix and the Gyro. I think that will definitely be, again, outperformance in the marketplace. And then, the revenue synergies from Hand Tools, in particular, with respect to the DeWalt tools, are also kind of differentiating us in the share point of view. So we're probably outperforming by a couple of points there.

And Eric, the second part of your question, we're seeing no abnormal level of promotion or price activity, comfortable at that level. As you know, there's been some commodity deflation, which is helping margins, but not so much that it's placed a tremendous pressure on price. And fourth quarter, there's a tiny bit of seasonality in the consumer piece, but that has been what's driving our business. So right now, I think, another thing that's always an area of interest, our best view in our top meetings with customers is inventories are at a very normal level. The data is so much better, both at the customer base and internally, and the ability to share it transparently, because nobody wins when the channels are stuffed, and nobody wins when they are out of stock, as you all know. We see inventories as of mid-October approaching a busy season up in -- prior to, I'll say, the December doldrums as quite normal.

And the next question is from Dan Oppenheim from Crédit Suisse. Daniel Oppenheim - Crédit Suisse AG, Research Division: When you're talking about the emerging markets, you can -- you had shown that Latin American and Middle East being 75% of the emerging market revenue. When you think about the growth initiatives, how much is going to be focused on those regions versus the rest of the world in terms of emerging markets and thinking about sort of what we need to achieve then in terms of growth there, and also what you're thinking getting sort of organic revenue growth in Latin America and Middle East without more initiatives?

Yes, well, clearly, the resource allocation will be towards the larger markets that are -- that we're currently underweight in today. I think where we -- in Latin America and Middle East, Africa -- well, Middle East, I'll say, we have excellent coverage, sales coverage. And really the key there is just we can -- and we have pretty good MPP products that we've developed locally in both those cases. However, in some cases, the products are sourced, so the products that we will manufacture in local markets is -- that's part of the strategy there, and then just to leverage the resources that we have in the market today in those large markets that we're already pretty overweight in. In the underweight markets, it is absolute majority, probably 70% to 80% of the resource allocation will go there. It's all about getting the right products with our SBUs and then basically flooding the market with feet on the street that can develop the distribution channels to drive share growth in those markets. China, India, obviously, are the 2 biggest. But I will tell you, I just got back from Russia, Turkey, Dubai and some other countries earlier in the year. And some of these kind of medium-sized markets that I'm talking about really offer enormous potential, and it's really just about getting the right products and getting the feet on the street. The brands that we have are phenomenal. The recognition of the brands is amazing. The markets are hungry for some market development, and we're going to provide it.

And Dan, this is John. Just to follow up and certainly, hopefully, just expands what Jim just said in a very simple manner. As you know, or some of you know, I've spent 14 years of my career living and working abroad. And as Jim, myself, the business leaders huddled to talk about the organic growth opportunity, I guess we always knew, but we've come to the realization that one size doesn't fit all, and that's really been the model that we've been using, which is why we elevated it as a corporate priority. But simply said, it's going to be different in each and every one of those markets. But I think Jim just said it well. It's what's the customer's focal point? It's going to be different in each of those markets depending on its degree of development. What is the product design? We can't simply design one product in Towson, Maryland and dummy it down a little bit and sell it all over the world. So there's 3 engineering centers around the world that are going to drive this activity. And last, but absolutely not least, how we are organized. And Jim described that in great detail, but who is accountable, who's accountable in the region, what's his or her relationship with the relevant business and with corporate, and then finally, how do we track it? So that's nothing different than what Jim said. But I think to summarize it, it is a -- it's a new approach for us, but it's one that we believe it's tested and proven. We've got a lot of experience behind it. And I think we've just validated it with the work we've done with consultants, advisors and, most important, our own team, over the last 3 or 4 months.

And the next question is from Nicole DeBlase from Morgan Stanley.

So I just want to ask a little bit about 4Q, the implied 4Q guidance. So it looks like you're now looking for a modest organic decline in 4Q, and the bulk of that is driven by a little bit of weakening within the Industrial segment. So it would be really helpful to get some color around your expectations Q-on-Q for IAR versus Fastening, what's driving the weakening?

Yes, Nicole, it's Don. What I mentioned was that we saw in the third quarter that all of our Industrial European businesses retracted. We expect that to continue at a slightly worse trend, so we would imagine that IAR would retract a little bit more than we saw in Q3. Engineered Fastening will probably have saw 7% growth rate overall. In Europe, they were down 3%. That will be slightly larger as the Industrial European piece of that business, which is not tied to automotive manufacturing, will be down high single digits, maybe double digits at this stage. And then we'll see probably a flat performance with European auto business for Engineered Fastening. So those businesses are expected to experience a fair amount of pressure. There's a little bit of our Infrastructure business in Europe, as well, which will be pressured, but that's not a significant number.

And the next question is from Ken Zener from KeyBanc Capital Markets.

Just a follow-up on the last question, which you addressed for the European businesses. How much of the cut is kind of related to what you're referring to in the U.S. in locks and doors? And are you really seeing a delay of backlog, so you have it, or is it just that it's kind of weaker backlog? And sticking on the U.S., the recent transfer of Apex to new a owner. You guys have had stellar results in the business that had problems if you go back 5 years ago. So do you think Apex's new owner is likely to bring more margin pressures as they seek to regain market share?

I guess 2 points. Ken, the backlog I referred to is primarily in convergence security, not mechanical locking. The issue that Brett's team is dealing with in mechanical locking is that the market got smaller and faced tough economic times. There was a tremendous move from premium to mid-price point. And full disclosure, our mid-priced point offering was not up to snuff, and the teams worked very hard to get that developed in the marketplace and it's there. That's on the Mechanical Security side. The backlog conversion is simply the orders are there, we've got to get them converted, we've got the installations done, we've got to get them done right the first time. And that's one of the things that led to a management change within our Convergent Security business, where within the last 6 months, we've -- 2 internal, 1 external -- have added 3 senior leaders to Brett Bontrager's team to accomplish that. Regarding Apex, it's not our role to speculate on competitors and what their new owners will do. It's quite a, I'll say, diverse portfolio of brands, many of which are secondary and tertiary. That in and of itself is a challenge. Joint ventures are a challenge. And so as a consequence, we felt that -- we don't think that was a major factor, the Apex joint venture, in our ability to gain share. And I would think that's not going to be a major factor going forward. It's an interesting business. It's in good hands from a very, very professional private equity owners. Talk to them about their strategy as opposed to us. It's not our place to speculate.

I think the only thing I would add is that it's -- of all the various outcomes that could have occurred, it's probably the best for us because they are rational people. They are highly levered. And they will pursue some growth opportunities for sure, but there's plenty of opportunities out there for 2 of us. So I think it's probably in a very good place. And it will probably be for sale in a couple of years, too, so we'll have a look at it then.

And the next question is from Mike Wherley from Janney Capital Markets.

I was just looking at Latin America, and it's been very strong for you guys despite some slowing of GDP growth in Brazil. Now I was just wondering, how much of your growth in Latin America is from the BDK revenue synergies, and how much is from countries outside of Brazil?

There's -- BDK revenue synergies are not just Brazil, Mike. You've kind of asked 2 questions that are hard to answer. Brazil is 65% of our Latin American business. And roughly 65% of the growth has come in Brazil and 35% has come outside. The overwhelming majority of all of that growth, think of it as BDK revenue synergies, specifically Black & Decker, legacy Black & Decker had a very capable manufacturing plant with a very capable local leader, well-established commercial teams and distribution channels in all markets in Latin America, and a very capable business leader in Jaime Ramirez. And what we've been able to do is leverage 2 things. Production in Brazil but for -- it serves all of Latin America through the -- our Uberaba plant where we've been able to do some simple hand tool assembly and production there, number one. And number two, take very, very popular but previously cost competitive black and yellow Stanley products that were imported that are now managed and sold locally through a well-established distribution channel. That's been the big lift. So simply said, the business is pro rata with the size of the markets. And you can contribute the overwhelming majority of that to what we do refer to as the Black & Decker revenue synergy.

And the next question is from Mike Wood from Macquarie Capital.

Security margins are tough for us to model given the mix shift that you mentioned in the Niscayah integration. Last quarter in the conference call, you talked about flat operating margins in Security for the full year. It looks like that may have come down. So can you walk us through what's changed in the Security side since last quarter on the margins?

Yes, I would say that the big thing that's changed is really the impact of what we're talking about around MAS Commercial. So that's clearly creating what we are calling a negative mix impact to the company, but it's also true for the Security segment. So we saw, as Jim mentioned, a really solid performance in Security from a rate perspective given those pressures, but we would expect it to, sequentially from third quarter to fourth quarter, retract a little bit more given those pressures and probably, obviously, will be down slightly total year when you look at it versus expectation of flat back in July.

And the next question is from Dennis McGill from Zelman & Associates. Dennis McGill - Zelman & Associates, Research Division: As you guys think about the organic growth initiatives, historically, obviously, have been focused on acquisitions and that's a bit of a cultural change. Can you talk about what you're doing internally either from an incentive compensation structure, other initiatives to change that culture or shift that culture to an organic growth focus that can be sustainable even beyond when you go back to M&A?

Yes, Dennis, it's a very fair and, I think, appropriate question. 8 or 9 years ago, I implemented, with obviously the tremendous support of Jim Loree, who is already here with our Chief Financial Officer, Mark Mathieu, our head of HR, organic growth as a significant portion of the short-term incentive for the entire management team. It made good sense. There were very specific goals for each and every business. And we carried on for 4 or 5 years, I think, with tremendous success, both organically and via acquisition, which is where we deployed most of our -- 2/3 of our cash flow. As we faced what was clearly going to be some really tough economic times, 2008, '09 -- 2007, '08, '09, quite frankly, some very thoughtful and experienced board members led us to the conclusion -- or helped us to the conclusion that it was going to be very difficult to grow organically in that environment, and protecting our balance sheet, focusing on cash flow was a very important thing to do to weather that storm. It's exactly what we did. That was the initiative or the driver, if you will, behind SFS, which has generated tremendous amounts of cash and, quite frankly, I think it's why Stanley was in the position to acquire Black & Decker. As Jim pointed out, we didn't think that would last 5 years, but it has. And rather than continuing to work focused just on cash flow, on income conversion, we've decided, if you will, to take organic growth into our own hands. So the simple answer to your question is yes. Anyone and everyone involved in this, a significant portion of their short-term compensation will be based on profitable organic growth. The exact specifics to that, I'm not going to reveal at this stage. It will be in our proxy that we publish next February. But it will be a specific part, and there'll be a select -- a precious few number of individuals. And Jim talked about how this team was staffed and organized. There'll be a handful of individuals that the overwhelming majority of their incentive will be based on that, but that will be specific to the initiative.

Yes, another element to this is, which is not compensation-related, or at least it is indirectly, is that we are a very, very tightly managed company when it comes to P&Ls, and especially at the business level and the region level. In both cases, when there are revenue shortfalls, the initial reflex in the organization is to cut costs. And frequently, the businesses were attempting to make emerging market growth investments, but when the cost cutting kind of came to bear, typically, emerging markets were not unscathed, although we directed them to minimize that, they just couldn't help themselves because they are measured on P&L and they're very capable people when it comes to delivering those kinds of results. So the overlay that we've created here by absolutely making the investments at more of a corporate level or at least corporate oversight level, we can protect those investments, and we have to kind of sort of put our armor on and kind of get through -- if the environment gets tough, we have to protect these investments, and we will. And that will be a big difference. The other thing is with respect to kind of creating the center of gravity at the region level, you don't have the same incentives to cut costs that you would in the emerging markets that you would if you are running a business that had a global footprint because -- and you are measured on a quarterly P&L. In the emerging markets, your -- the measurements of these individuals are going to be -- well, yes, they are going to be P&L focused. There's going to be a clear understanding between them and us at the corporate level that our expectation is that we achieve organic growth and we do that with investments and the investments are protected. So there's a couple of other subtleties there beyond just direct compensation that we're addressing through this change.

And the next question is from Sam Darkatsh from Raymond James. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: Question regarding the sale of HHI, receiving a 7.5 multiple on EBITDA, whereas the -- at least the housing pure-play comparables that are publicly traded are considerably above that. I know you guys are very savvy as it relates to capital markets, you're very thoroughly advised. I was just curious as to the reasoning behind selling it privately versus a potential carve-out or going to the public markets for that. Was it because the market wouldn't bear it based on your research or data fact that you were getting immediate cash created that decision? Just a little bit of background, if you could.

I think 7.5x, when you really look at that business, I think, is a very fair price. And spinning it didn't make a whole lot of sense given all the extra cost and the fact that it's a very tax efficient transaction. If you look at the composition of the portfolio, the one thing that is, perhaps, underappreciated is that $200 million of that business was Pfister. And Pfister, we attempted to sell on its own and frankly couldn't get it done at anything over 5x multiple, and that would have been a victory if we could have gotten that and would have required seller paper and a number of other things. And we finally just said, the heck with that, let's mix it in with HHI locks and so forth. And so you have to kind to think of it in terms of we got, for what really is the heart and soul of that portfolio, we got something closer to 8.5x. And that's a pretty good price in relation to -- especially the after-tax proceeds that we received for that.

It's also a highly profitable business, Sam. And I mean, it's just math. One of the reasons 7.5 doesn't look meteoric relative to some of the comps that you're comparing to is this is $186 million or $190 million EBITDA business. There aren't a lot of housing pure plays, to use your words, with those kind of EBITDA margins. And lastly, not so much the multiple or the margin or how to sell it, we just -- we wanted as disruptive a process as possible because this is an ongoing business that if we didn't sell it successfully, we wanted as little disruption as possible, because it was a business that had then turned around nicely and was performing well. But lastly, remember, this is primarily a design source and ship business. And to Jim's point, Pfister is 100% design source and ship business. Not that we can't do that. We're a manufacturing company and we think we do it pretty well, between global sourcing, product design and production. And that lever for us and ability to further improve the business really didn't exist in this business, and that was part of the driver. But at the end of the day, we're really happy with the...

Yes. And there's also a missed perception with respect HHI being so tied to the housing market. When you look at the company's exposure to construction before and after HHI, it is still right in the 30% zone. And the fact is that HHI is a replacement business for the most part. It is not a new construction business. You look at channels that it sells into, they are not going into the builder market for the most part. They're going into replacement, remodel, those types of markets. So we haven't really changed the complexion of our portfolio dramatically as it relates to exposure to the construction market. And the market would not have viewed this business as a construction pure play, very important point, which would indicate that we got a very fair price for it, as was mentioned.

And the next question is from Richard Kwas from Wells Fargo.

Just a follow-up on '13 in terms of your initial outlook. When you're assuming for Europe, and I know it's early and you're giving formal guidance in January, but should we assume that Europe is down similarly in '13 or is that how you're thinking about the business right now, and that could be offset by the U.S. and then some of the revenue and cost synergies that you have factored in. Is that the right way to think about it?

Well, as I mentioned, Rich, we're not really giving thoughts on organic guidance for 2013. There's just too many factors out there that are going to change, most likely, over the next 90 days. There's things in Europe, there's things in the United States, et cetera. And as a result, we're not really giving thoughts. But I think if you look at what's happening to us in Europe this year, there's no reason to suddenly indicate we're going to see growth in the first quarter of 2013 in Europe. So I think you can use it from that perspective and look at our overall portfolio, but there's going to be variations that happen in the next 90 days. Things like the fiscal cliff in the United States, that we don't know the impact of that, and the U.S. economy, the continued crisis in Europe, and the Eurozone, as to what will happen with Spain and how that might impact business in that particular area. And then slow growth in China and emerging markets as well. So it all goes back to the theme that we started with, which is that we don't -- the macroeconomic environment is not real robust. And overall, when you look at it, doesn't feel like you're going to see a lot of growth beyond 1 or 2 points. So we're looking to stimulate it with these growth programs, which is what we've tried to focus on this morning and get people to recognize that we're taking action in response to an environment that we don't see changing, or improving dramatically, going forward.

And the next question is from Michael Kim from Imperial Capital.

Just a specific to Niscayah. Can you talk a little about the organic growth profile and how much of that headwind is from project rationalization versus the macro environment, particularly in Europe? And what you guys can do on your own actions to keep more of a flatter growth -- or flatter organic profile and potentially gain some share?

Sure. I think when you look at the pro forma and Niscayah business being down, roughly 5%, I think it's an actual -- it's a pretty good performance given the macro environment in Europe, in particular, given that they're really shifting to a more profitable business model around installation, revenues, as well as trying to drive more recurring revenues into the business model long-term. They'll be down 5% versus our expectation of 7% or even possibly 10%, we think it's a great story. But we would imagine that, that type of situation would continue probably into the early stages of next year and then, depending on the macroeconomic environment, would start to improve. If you look at the 5% today, I would say that probably at least 1/2 of it is due to the macro environment and the other 1/2 is more due to the model shift.

And the last question will be from Peter Lisnic from Robert W. Baird. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: Lots of moving parts here, but if we could look at 2013, and, Don, if you could maybe give us a little color on the puts and takes for the free cash flow conversion for the year, and maybe if you could include any sort of pension impact and what the preliminary outlook there might be would be very helpful.

Sure. I mean, I don't have a precise view on free cash flow of 2013, but if you want to get a little input, I would expect that we would imagine we would have continued improvement in working capital next year, and our expectation is usually about 1/2 a turn as we go into the year. We will be making more capital investments related to emerging markets to make sure we have the right products in the different countries that we walked through this morning. So that could be a little bit of pressure but even with that, I still think we'll have improvement in working capital turns in 2013. There's no major pension fundings beyond the current run rate that would pressure 2013, that would be a new item. So I would expect, based on continued accretion in our earnings, continued improvement in working capital, we would expect that our free cash flow would go -- be accretive to the $1.2 billion that we're experiencing this year.

Thank you. This concludes the question-and-answer session of today's call. I will now turn the call back to Kate Vanek for closing remarks.

Thanks, everybody, for joining today. Please feel free to reach out to me if you have any questions following the call.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.