Eaton Corporation plc (ETN) Q3 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Eaton Corporation Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. And I'd now like to turn the conference over to our host, Mr. Don Bullock. Please go ahead.

Good morning. I'm Don Bullock, Senior Vice President of Investor Relations. Welcome to Eaton's Third Quarter 2012 Earnings Conference Call. Joining me this morning are Sandy Cutler, Chairman and CEO; and Rick Fearon, Vice Chairman and CFO. As has been our practice, we'll begin today's call with comments from Sandy followed by a question-and-answer session. This presentation today contains certain forward-looking statements. Many factors could cause actual results to differ materially from those in these statements, including those set forth in our Form 10-K filed with the SEC on February 24, 2012, any unanticipated delay or failure to close the Cooper acquisition. This presentation includes certain non-GAAP measures as defined by SEC rules. A reconciliation of those measures to the most directly comparable GAAP equivalent is provided in the Investor Relations section of our website at www.eaton.com. At this point, I'll turn the call to Sandy.

Great. Thanks, Don, and welcome, everyone. I know a number of you are experiencing some telecommunication challenges this morning post-hurricane, so I'm going to try to call out the relevant numbers as we go through the individual pages of our presentation in case some of you have not been able to pull that down. I'm on Page 3 of our presentation, I'm going to start my comments this morning. Obviously, we reported operating earnings per share of $1.07 this morning, net income of $1.02. Sales were down from a year ago. They were $3.95 billion this year, down some 4% from a year ago. The largest element really contributing to that was negative ForEx of 4 points. Our end markets were down 1% this quarter, reflecting the deceleration in markets that I spoke about at a number of investor conferences during the third quarter, and our sales from emerging nations continued to be a little weaker than they were a year ago, now about 24%, whereas they peaked around 28%. Segment margins had a strong 14.6% and then a strong quarterly operating cash flow of $606 million, which we expect to strengthen further in the fourth quarter as we noted in our earnings release. And this individual quarter would've been about 10% higher if we had not ended on a weekend, and I think many of you are aware that when you end on a weekend, your accounts receivable or collections tend to drop over into that next week. If we move to Chart #4, you'll recall at the time of our second quarter earnings call that we did not provide specific guidance for the third quarter. But deductively, if you looked at the difference between our full year guidance and what we achieved in the first half, that's really…

I'll turn it over to the operator, who'll give us some instructions for the question-and-answer portion.

[Operator Instructions]

Our first question comes from Steve Volkmann with Jefferies. Stephen E. Volkmann - Jefferies & Company, Inc., Research Division: I guess I'm just trying to think about sort of the base business as we look at the fourth quarter. You traditionally give us some ideas about margins, and I guess we haven't done that. And again, sort of excluding the Cooper impacts, which will clearly be numerous, how should we think about those margins?

Yes, I think our -- the best way to think about at this point, Steve, is we're anticipating that fourth quarter is going to look fairly similar to the third quarter. And while we're not providing specific guidance, I think that's the best indication we can give you in terms of how the year is likely to proceed at this point. Stephen E. Volkmann - Jefferies & Company, Inc., Research Division: Okay, that's fine. Tax rate in the fourth quarter?

Again, I'd put that in the same category that we can really only speak to kind of overall results, and I would say that, again, we think things are going to look pretty similar in the fourth quarter to what they did in the third quarter. Stephen E. Volkmann - Jefferies & Company, Inc., Research Division: Okay. And then just one bigger question, Sandy. In 2013, is there anything from sort of a regulatory basis vis-a-vis, I guess, the acquisition of Cooper that would prevent you from doing additional divestitures if you wanted to?

No, there wouldn't be any, no regulatory restrictions.

Our next question comes from Jeff Sprague with Vertical Research.

Sandy, can you elaborate a little bit, if possible, on the ramifications of what you were saying about the purchase accounting moving from '13 to '12? One thing that I'm sure jumps out to everyone on the slide is that the difference between operating and cash EPS is $0.50 in '13 and it's $0.30 in the other years. Does that kind of ballpark the difference we should be thinking about that's moving from one year to the other, that $0.20 differential?

No, I wouldn't refer to those 2 sets of numbers. It's really a portion of the costs that would've been incurred in 2013 that we would expect would be pulled into 2012. And that's the piece that we really can't give you specific estimates on because it's going to depend upon exactly what day we close on. And there's a lot of complexity within that difference between the $0.10 of operating earnings per share and the $0.40 of the cash accretion. So within that $0.50 difference is part of those costs will move and part will not move.

Okay. Can you provide a little bit of color on how October trended? And was there any kind of change in activity level that was discernible relative to September?

Yes. We've not closed all of October yet even though today is Halloween. But I can say that, generally, what we've been seeing has been the pretty good tone on the Electrical side of the business. And we've been pleased about that. We did talk during the quarter about the fact that I think the way to think about our Electrical Americas business is the continued very slow conditions in the large data center segment and in the small single-phase UPS business. We have seen some activity in virtually every distributor channel, where distributors have been expressing some concern about what happens at year end. And I'd say this happened much more in other business, but you get a little bit of it every time you're talking to distributors. And what will the fiscal cliff build -- bring and should we hedge ourselves? Very good activity on the service side, very good activity in residential and nonresidential. If you flip over into the Hydraulics business, I think this one and Truck, perhaps, give you the biggest feel where we've seen customers kind of hedging their bet, if you will, where there have been some higher retail sales inventories. We've seen people speak explicitly about not placing orders until they see how things come out here at year end. And I think the more challenging issue for we, and I'm sure you as well, is trying to assess how much of the slowdown that's happened here in the third quarter and we think carries into the fourth quarter is related simply to election dynamics and associated concerns about the fiscal cliff and how much is in a more secular issue. And that's, I think, anyone's guess at this point. Inventories are not bad out there. They're little higher in some of these markets than I think people are trimming them. But we aren't seeing the kind of bubble activity that we saw back in 2008. So the benefit of Eaton's broad diversification is, as you see, we are doing well across a number of markets where they're still quite strong. We saw the pullback really in Hydraulics and Truck and then to a smaller extent, in our Automotive business.

Great. And then just finally, can you address in a little more detail Electrical Americas margins? I'm assuming maybe you had some positive mix effect here with Power Quality a little weaker. But also are you in a kind of a price cost sweet spot? Maybe you could address that and kind of the sustainability of margins at this level?

Yes, I would say it's -- the margins issue is really not an issue of rotation from Power Quality to Power Distribution. We do have handsome margins in both arenas. I'd say it's much more a reflection to the type of work we're doing, where we're really doing a lot of very high-value complex assignments for customers, major jobs where we're in a fairly unique ability to do that work because of some of our patented technology. And so I'd say that's the real big payoff we're seeing.

No price cost nirvana to speak of?

Not much different than we've seen during this year.

Our next question comes from Ann Duignan with JPMorgan. Ann P. Duignan - JP Morgan Chase & Co, Research Division: Just to follow up on the Cooper acquisition. We know that once you filed in Europe, it's going to be about November 23 before they rule. Is that kind of the last hurdle, Sandy? Is there anything else that has to happen? I know there are minor other countries that have to approve it, but is that the biggest hurdle to closing?

Yes. Just 2 at this point, Ann, in terms of the regulatory approvals, the EU, as you mentioned, and China. And so we have 8 in hand, if you will, at this point, and we have 2 to go.

And Ann, it's Rick. There will be 2 court hearings: One to sanction the results of the vote, that's a relatively short hearing; and then there's a final hearing after the regulatory filings are done. Ann P. Duignan - JP Morgan Chase & Co, Research Division: Okay. So does that push the date back further than November 23?

No, we're not commenting on a specific date.

No, no. Yes, we're not giving any specific date, but I'm just saying that there will be 2 hearings that we anticipate will occur in the fourth quarter. Ann P. Duignan - JP Morgan Chase & Co, Research Division: Okay. Then back to your discussion of the end markets, Sandy. You noted that within Hydraulics, not only was it mobile equipment, but you mentioned agriculture. So I'm just wondering, knowing who your major customers are, what you're seeing there?

We saw it in the mobile segment, and that's where the far bigger kind of -- I'm speaking to orders here, with the overall 25% year-to-year reduction we have on the third quarter orders, the mobile side was higher than that. And it was pretty well spread across ag and construction, and then some of the sectors that also serve energy as you've seen frac-ing come off quite a bit versus a year ago. So what we saw there is people -- it's not that their retail sales on the ag side have been weak, but inventories got a little high. And so we've seen people trim back orders in that activity. Ann P. Duignan - JP Morgan Chase & Co, Research Division: Okay. And then just a quick comment on -- a little bit of color similarly to Brazil on the Truck side specifically?

Brazil, I think you will recall after really a perfectly awful first quarter, there were expectations that, that market might come back as the year's gone on. It really has maintained itself very weak. Now there are people speculating the economy will be better next year. From an order perspective, we've not seen it at this point. And so there still seems to be a pretty good inventory there, and we are hopeful we'll see a better market next year. But it's still weak for us in Brazil. Ann P. Duignan - JP Morgan Chase & Co, Research Division: And that's specifically on Truck, Sandy, not the [indiscernible]?

Yes, that's specifically truck. The ag market has been better than the truck market, yes.

Our next question comes from Andy Kaplowitz with Barclays.

Sandy, if I can follow up on Truck for a second. Margins have held up very, very well despite lower sequential sales. Can you talk about the sustainability of these margins, sort of what's going on there? And then if you look into your forecast in truck into '13, pretty high in terms of relative growth versus some of the other guys. So I guess what are you counting on there? Are you counting on some recovery in Brazil and basically a replacement market in the U.S.? Just your assumptions there.

Yes. I think, over time, we've talked about that this general production range, when you kind of attune it to a NAFTA Heavy Duty, when we're in this 225,000 to kind of 260,000, 275,000 range, these are very attractive areas for the industry. And I think you're seeing us, this run rate was kind of a 260,000 run rate on production here in the third quarter. And so you've seen us be able to maintain attractive margins, and we've worked very hard. As I think many of you know, over the last couple years, to have very high variable cost element so that we were able to range up and down. I think that's why we've been able to maintain the strong margins we've had. Comments about next year is that, obviously, we're thinking that the NAFTA market is going to look fairly similar to it has this year. Now let's just recall, we had a stronger early part to the year than we had the end of this year. And so you kind of have to think your way through and how that lays out for next year. And we do feel that after really a nearly disastrous year in Brazil this year is that there will be some recovery from that. I think those are the kind of 2 end posts of our thoughts at this early time about 2013.

Okay. Sandy, when investors call us and they worry about EMEA, it seems like they worry about Hydraulics and given sort of what happened in that 2008 and 2009 period. You've talked about some of the OEM sort of rightsizing the businesses, and then this quarter, obviously, has been a little different. With that bookings number in the quarter, it does seem a little concerning, and then you have only a 2% to 3% drop for next year. I guess how do you look at that business, Sandy? How do you get visibility that it's not going to be worse than that as you go forward into next year?

Yes, I would say maybe just a couple. So let's start in Asia because that's the market that you'll recall cracked and really came down quite hard. And that's been one of the issues that has impacted our own results is that we are not anticipating a significant recovery in the first half of next year. And we still think there's a lot of inventory specifically in this construction equipment market. So I think a fairly modest assumption in terms of what comes back there. Here in the U.S., our feel for it is, is that OEM planning was maybe a little bit more optimistic than the market has turned out, so that we're going through a period of inventory reduction right now. But it's not the kind of bubble we were facing last year, and we've already seen the reduction in the European markets. So we don't think that, that view that we've expressed at this point as a preliminary basis is aggressive, if you will. We've seen a number of the OEMs out with their own forecasts, and we think we're pretty much in line with them. So we are not seeing what we saw in 2008, which is when you had wholesale cancellations of backlog from customers. And so we don't see this adjustment being as severe as we saw in 2008. Now just to come back to your opening part of your question though, I think as investor think about Eaton, and we're now a very short period away from closing the Cooper business, it's worth keeping in mind that approximately 60% of our revenues based on 2011 pro formas now become Electrical. And so I think as you get a sense for the earning power that you've seen in this quarter, both for our Rest of World and our Americas business, I think you get a sense for how that well-balanced portfolio really modifies any concerns about cyclicality for the company.

Our next question comes from David Raso with the ISI Group.

Regarding the initial 2013 end market outlook, trying to extrapolate that, how to think about Eaton sales next year. So if you're looking at market growth of 2% to 3%, I can calculate acquisitions probably add about 2% to 2.5%, so we're looking at kind of 4% to 5.5%. But for currency, let's assume, just for simplicity, it's flat over the course of the whole year, how should we think about outgrowth for 2013? How are you perceiving that at this stage?

And David, if I could just -- on one number you mentioned, you're right, the consolidated market in excess 2% to 3%. The incremental acquisition revenue expressed in dollars, not as a percentage, would be about $250 million. I think the number you quoted would be a little higher than that.

I'm thinking about $330 million or so. I mean, the Turkish acquisition adds $150 million alone, and then the Jeil or how do you pronounce it, J-E-I-L, is about another $95 million to $100 million there.

Yes, all I would say of it is that we've taken the Hydraulics markets down this year and next year. And so what we're trying to provide is an update for every one of the 2 Electrical and the 2 Hydraulic acquisitions we've done this year with the actual closing dates that was achieved for them. And our best estimate is that it'll be about $250 million between the 4 of them year-to-year.

That includes the new one, Rolec?

Yes, it does.

Okay, so let's call it $250 million on the pipeline this year.

Yes. So back to your original question.

1.5 or 1.6.

Yes, I think that's the better range. ForEx, we don't have a view on at this point either, and we typically are wrong in whatever our view is. So we'll tune that up when we get to our guidance in January. And then I think the last place to look is -- on the outgrowth is take 50% of that 2% to 3%, and that's generally been our kind of planning number. And we don't have a better number than that at this point.

Okay. So 2% to 3% market, 1-ish outgrowth, 1.5% for acquisition. So it's kind of 4.5% of 5.5%. How to think about the margins? When you look at the end market growth, the mix doesn't scream good or bad necessarily, right? I mean, it's not dramatic, the high-margin businesses outgrowing the low-margin. So it's probably not a major issue. So when I think of the incremental margins then on that, call it 5% all-in type growth, how structurally are you thinking about your ability to drop to the bottom line, that revenue growth?

Yes. At this point, David, and obviously, we normally don't give any guidance at the end of third quarter for next year. We actually give it in January. We are in the midst of our planning process, so I can't give you a specific incremental. I guess you'll simply have to look at the incrementals we've been achieving this year, and I think we've been pretty credible in and around those. But we'll have a better sense for that after we get through all of the planning. The one number that I think that we have shared was the U.S. Transportation Act when it was passed, the incremental pension contribution, and this is a cash issue, not an expense issue, would be lower than the numbers we historically had provided. And it takes about $100 million off of that contribution that we have been making the last couple years, which has been on the order of about $300 million.

And that's an expense number, correct, or...

That's a cash number. Cash number. What they did was they changed how you calculate the funding requirement, and that's obviously helpful to us in terms of our own cash planning.

Well, how should I think about it from an expense side then, trying to think about the GAAP margin?

Right, it's early, Dave. But if you consider that the discount rate has probably declined some, we were at 4.7% last year, it's probably somewhere in the neighborhood of 4% right now. And every -- the sensitivity as of last year to every 0.25 point change in the discount rate was about $14 million. So there's likely to be some extra pension expense related to that. On the other hand, our return this year has been far above what we had targeted. In fact, if you looked at our return on the pension plan through yesterday, we were up about 12%. So that'll provide some offset. So at the end of the day, there's likely to be some increase in pension costs. I just can't estimate it right now.

Last one, a margin question. The Electrical Rest of World margins were obviously pretty impressive. So given the orders that you gave us for that business, should I think of that 11%-plus margin for this quarter? And you're saying the fourth quarter will be similar to the third quarter for the whole company. Just trying to look at Electrical Rest of World margins, do you feel it is now a double-digit margin business looking out in the sense that we've had our 8% to 9% or 8% -- or 9-ish the last 4, 5 quarters, really, and all of a sudden, we have 11.2%. How should I think about the run rate?

I think it's more reasonable to think about it as double-digit, exactly. That's very much where we've targeted the business. And we've spend a lot of time kind of getting it resized early this year to perform at that level.

Our next question comes from Jeff Hammond with KeyBanc.

Just a couple finer point clean-up questions. One, on Aero margin, maybe a little bit better understanding in when did those snap back? I mean, in the fourth quarter or into '13? And then you mentioned in your outlook confidence in Electrical Rest of World, more confidence in recovery in Asia-Pacific than Europe. Maybe just expound on why you have that confidence in the Asia-Pacific rebound?

Yes, first on the Aero one, Jeff. I think expectations are that the fourth quarter is likely to look a lot more like the third quarter. This choppiness that I've spoken about a couple of times on investor conferences during the third quarter is that it's not choppy on the commercial OEM production side. That's continuing to increase, and you can get all those numbers publicly, and that's pretty steady. What has been choppy is as the airlines have continued to be under a lot of profit pressure, it's much harder than it historically has been to be able to anticipate or predict their aftermarket or spares type of ordering, and we've seen that curtail pretty strongly. I don't see any reason why that's going to change during the fourth quarter. So I think that mix change back to a more normal amount of aftermarket is probably a '13 issue, not a balance of '12 issue. On your question on Electrical Rest of World likely market index for next year, we're just a little bit more bullish on Asia in terms of the economy, because that's not just China, that's other areas as well than we are on an immediate snap back in Europe. And so that was the nature of the color behind those comments.

Our next question comes from Eli Lustgarten with Longbow.

A lot of stuff has been answered. Let me just go back to your comment of the fourth quarter looking like the third quarter. And I guess a questioning, because seasonality starts to take effect in some of the markets, and we already know that Truck production is going to be a lot lower in the fourth quarter than the third quarter. We know Hydraulic demand's going to be a lot lower in the fourth quarter than the third quarter. I'm just wondering this similar combination, what's changing or what will hold it pretty close since most of the markets seasonally will be weaker in the fourth than the third?

Yes, I would say that, obviously, by deduction there that we think the Electrical businesses will be -- will make up some of that difference. I think you see patterns in how some of our business lays out. There tends to always be a big service component toward the end of the year as companies are doing a lot of service work over the 2 different holidays that you have in the fourth quarter. That tends to always bring on a much bigger side on that side of the business.

And Eli, you're also going to have full quarters of Rolec's revenues, and we didn't have that in the third quarter.

How much would that add to the fourth quarter?

Rolec is operating at about an $85 million a year run rate.

And that -- so that'll be additive, it's mining business related, isn't it?

Yes.

And mining exactly is under pressure in the fourth quarter also that's why...

Well, that's the South America mining.

Remember, this is not mining equipment in the Electrical industry. We're selling into the mines themselves. And so the very large expansions that are going on in Chile and Peru today is long lead time work. And those mines, in terms of getting them open, you're not seeing a back-off there.

So basically, we're expecting both better Electrical -- both North America Electrical and Rest of World Electrical to go – to have higher volumes in earnings in the fourth quarter and similar margins?

Yes, that's the offset to the others you mentioned.

Okay. And as we go into the first half of 2013, I guess you've sort of expected that the first half, second half will be weaker first half. Is it fair -- I mean, at this point, is there any reason to assume why the first half of '13 wouldn't be very similar, adjusting for seasonality, obviously, in the first quarter than in the fourth quarter in almost all the markets and cost of orders...

Yes, and I would say that, typically, what we find in our business pre-Cooper is that the first quarter is always our weakest quarter from a seasonal point of view. And from the economy point of view, and I don't know that we have this pinned any better than anyone else, Eli, our expectation is that however the Presidential Election ends and however the solution is to the set of fiscal challenges, it's likely to have some impact early in the year. We don't know how to calibrate that at this point. But that our expectation is that you have a little bit of that impact in the U.S. In Europe, you still have a fragile recovering economy in the first half. And that we think it's likely, although we can't be precise in this either, that in China, the seating of the new government and then whatever reforms and plans they take on will probably gain momentum as the year goes on. It won't be as strong at the beginning of the year.

One final one, are we talking about an 8% tax rate in the fourth quarter again? And what do we use for 2013?

Yes, we've not given any guidance for 2013 yet and, really, we will give that guidance in January at our conference call.

And the fourth quarter, we're talking 8% again, similar to what you reported?

All we said, we're not commenting on any specific line item because that starts to lead us down the route of guidance as that -- and that we think the overall quarter will be similar to the third quarter.

Our next question comes from Christopher Glynn with Oppenheimer. Christopher Glynn - Oppenheimer & Co. Inc., Research Division: I had a question on Sandy, the storm, electrical infrastructure replacements, getting the subway back online, other necessary projects. Would you expect any upsized benefits to your medium voltage product lines?

Yes. And generally, these types of real human tragedies tend to be ones where our Electrical business tends to get involved, not simply on the medium voltage and that work protectors, but also on the whole side of just the working -- the generator side of things, trying to get power reinstalled and get buildings restarted up, very hard to predict exactly how that'll lay out. But it generally leads to a little increase in business in that regard. This is going to be a very big project in terms of the size of the storm has covered so many areas. And so a little hard to see exactly what the timing will be, but it tends to lead to a little top in business. Christopher Glynn - Oppenheimer & Co. Inc., Research Division: Our next question comes from Andy Casey with Wells.

A few questions in there, as indicated earlier, kind of detailed points. But within the Power Quality business, can you remind us what's been driving the weakness year-to-date? And whether that continues or turns around in your initial 2013 view?

Okay. Two -- maybe 2 key drivers in terms of you take that single-phase market, which is the bigger part of Power Quality, that tends to track fairly close with server sales. And I think you've seen all the major server manufacturers report pretty mediocre years this year, and there hasn't been a major new set of technology that's come out that's either affected capability or price point. And so until that happens, you're more likely to see that market remain fairly slow. And that is our expectation for next year in those market segments that -- or market growth numbers that I provided. Secondly, the medium-sized and larger data center market, we think there has been a real hesitation. We commented on it a couple times this year. In terms of companies and organizations wanting to take on major additional capital expenditures with the degree of uncertainty that has been in the marketplace, particularly in Europe and particularly in the U.S., we don't see that changing here in the fourth quarter, don't see it changing in early 2013. Hence, when I mentioned that within that 3% to 4% expectation for Electrical Americas market index growth in 2013, that we were assuming pretty flat conditions in the Power Quality market next year as well.

Okay. And then on the U.S. fiscal uncertainty, I'm assuming that all gets behind us. I'm wondering if you could give us your sense of how long a lag could exist between resolution and demand improvement?

Yes. And I may be a bit of an optimist on this, but I personally am of the belief that if a credible plan is passed on a bipartisan way, that the economy and I think business confidence will improve fairly rapidly. It is not necessary that all of the cuts be affected in one year or that all the revenue rates be affected. But there has to be a plan that's credible that a supporting legislation can be put in place. And I think if that can come together, I think that takes a great deal of the uncertainty out of the air because people know what the game rules will be. And that's been the issue for some time is people want to know what are the rules, how are we going to move forward, what can people count on from a fiscal point of view. So I'm hopeful that, that type of bipartisan agreement can be reached. And I think if reached, it could lead to a different view in terms of U.S. growth rates.

Okay. And then one final clarification. In the quarter, there was a $20 million integration charge in corporate. What was that for?

Well, there are a couple of items there. A fair amount of costs of just the corporate team that is involved in the early stages of integration, then you add $10 million of costs related to the amortization of the fees on the bridge loan.

Our next question comes from Josh Pokrzywinski with MKM Partners.

Just a few clean-up items here. I guess going back on Hydraulics bookings. Do you guys have a sense for what the impact of destock or cancellations were? I guess cancellations, you'd have a better handle on, but just any color on maybe what is onetime here?

Yes, I'd say let me start with the destock, is that in our conversations with many of our large channel partners, they have been very, very careful here during the third quarter in terms of their restock. And I think we can all understand why. If you go back to the 2008 downturn, many distributors found themselves with much more inventory for a long time period. So I think they're tracking what's going on at the OEM level. They're trying to keep their inventories very, very lean, and they are doing so, we saw less than we would expect in terms of that inventory restock during the quarter. Again, I think to the earlier question, this is one of these issues that could come back if people's confidence becomes improved on what's going on out there in the economy. And then on the cancellation issue, we've not seen what we saw in 2008 when we saw broad-scale cancellations from OEMs of backlog that went out a number of months. What we have seen is the significant turndown in new orders as we believe people are trying to reduce retail inventories and really ready themselves for what I would call a modest or low growth U.S. GDP expectation. And I think that's the difference from when people were early this year, hoping that 2013 might be a bigger year. I think the people have downshifted as they've gone through the back half of this year.

In terms of actually having a number that cancellation's impacted that 25% buy, is that something that is relevant, or is it...

Yes. No, we really don't have an order for that -- or a number for that.

Okay. And then I know we're still ways here away from the close. And there's some things that you can't go down the path of with Cooper. But as you guys get a better handle on the cost base and full examination of the business on close, is your intention to kind of update folks to the extent that there is an update on some of those early numbers you provided on synergy capture and the amortization and some of the other moving pieces?

Yes. Once we close and when we get to our guidance end of January, early February, if there are updates to those numbers, we'll provide them at that time, yes.

Okay. But not at close proper?

No, no.

And our last question comes from Rob McCarthy with Robert Baird. Robert F. McCarthy - Robert W. Baird & Co. Incorporated, Research Division: I hate to beat a dead horse, but if I could bring you back to Electrical Americas. According to my calculations, with a normal incremental margin in the 30% range, there's something like $30 million of operating profit that you, in effect, sort of out-earned. But you've suggested that mix wasn't particularly notable as a contributor in the quarter. Price cost, I think I heard you say nothing unusual. Can you help me understand -- I mean, is 2/3 of that a reflection of cost takeout from earlier this year, or how do I account for the extra earnings there?

Yes. No, and the mix change, as I mentioned, had to do with the comment relative to Power Distribution versus Power Quality. That's not the issue. What I tried to -- maybe I wasn't clear enough on it is that a number of the solutions that we're doing for our customers today involve a number of these patented technologies where, frankly, we're bringing pretty unique value to our customers and protecting in and around the use of power. Those segments are very attractive to us. And I think what you're seeing is our team's success in really penetrating segments with these solutions where, yes, we are able to garner a higher operating profit and... Robert F. McCarthy - Robert W. Baird & Co. Incorporated, Research Division: That would include things like cooling then, Sandy, right?

No, it's -- I'm speaking to some of the technology we've talked about in terms of art flash, for example, whether that be residential or industrial or commercial where we're really providing superlative protection to people around very high-voltage and medium-voltage-type applications. So again, this isn't so much a Power Quality versus a Power Distribution. It has to do with segments we've been working to penetrate in an increasing way that have higher margins than some of the traditional segments. And that's -- so it gets right down to the applications that we're working. Robert F. McCarthy - Robert W. Baird & Co. Incorporated, Research Division: And should we think of that as a lumpy business quarter-to-quarter, or do you think that you basically are taking the business to a higher level range of margins that we should look for going forward?

No, and our guidance has been, over the last 2 years, is that we've continued to expand the margins in this segment as we continue to roll out these new technologies, which are the result of the continued R&D in this area that we have not cut back over time. So we'll issue new guidance, obviously, next year for the segment. But I'd say this is really fulfilling what we had laid out that we would do within the business. Robert F. McCarthy - Robert W. Baird & Co. Incorporated, Research Division: Okay. Now I just had a small technical-oriented question regarding the accretion, the Cooper impact numbers on Slide 15. The difference between 2013 operating and cash operating, that $0.50 and how it compares with the $0.30 in subsequent years, wouldn't a large proportion of the difference be accounted for by inventory write-ups that are typically fairly transitory and limited to the early period of integration?

Robert, it's Rick. You're correct. One of the very hard purchase price adjustments to estimate is the impact of the inventory write-up. I'd remind everybody, Cooper has over $500 million of inventory as of September, and so it's very hard to estimate that. But this difference, really, we have not built that in. This is principally the difference between the overall operating EPS and then taking out the amortization of intangibles, which is, of course, a non-cash item. Robert F. McCarthy - Robert W. Baird & Co. Incorporated, Research Division: Okay. So again, it is a non-cash item as well, but the inventory write-up effect would be incremental to the numbers on the table?

Yes.

And with that, we want to thank you all for participating in our call today. We will be available for follow-up questions as is our normal practice. I will be available. So thank you very much.

And ladies and gentlemen, this concludes our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.