Welcome to the Flowserve Third Quarter 2013 Earnings Conference Call. My name is Paulette, and I will be your operator for today's call. [Operator Instructions] I will now the call over to Jay Roueche, Vice President of IR and Treasurer. Please go ahead.

We appreciate you participating in today's call to discuss the financial results of Flowserve Corporation for the third quarter of 2013, which we announced yesterday through our press release and Form 10-Q filing. Joining me on the call this morning are Mark Blinn, Flowserve's President and Chief Executive Officer; Tom Pajonas, Chief Operating Officer; Mike Taff, Chief Financial Officer; and Mike Mullin, our Director of Investor Relations. Following our prepared comments, we will open the call to your questions. Instructions will be given at that time. Before turning the call over to Mark, I would like to remind you that this event is being webcast and an earnings slide presentation is available, both of which are accessible through our website at flowserve.com in the Investor Relations section. An audio replay will also be available on our website approximately 2 hours following the conclusion of the live call. Both the audio replay and the slide presentation will remain on our website for a period of time over the next few weeks. Finally, please note that today's call and the associated earnings materials contain forward-looking statements that are based upon forecasts, expectations and other information available to management as of October 25, 2013. These statements involve numerous risks and uncertainties, including many that are beyond the company's control. As such, we encourage you to fully review our Safe Harbor disclosures contained in yesterday's press release and slide presentation, as well as in our filings with the Securities and Exchange Commission, for additional information. These documents are also accessible on Flowserve's website under the Investor Relations section. Finally, please note, except to the extent required by applicable law, Flowserve undertakes no obligation and disclaims any duty to update any of today's forward-looking statements. I would now like to turn the call over to Mark Blinn, Flowserve's President and Chief Executive Officer, for his prepared remarks.

Thank you, Jay, and good morning, everyone. I am pleased with the company's performance in 2013, including our strong third quarter results. The key factor driving our significant operating and earnings leverage across the business is the commitment of our dedicated employees in executing our initiatives and strategies. Their efforts have prepared the company for growth. Our focus over the last 18 months on operational improvement and capital structure efficiency position the company for upcoming market opportunities. Profitably growing the business and delivering value for our shareholders remain our top priorities. We delivered on these priorities during the quarter. We turned mid-single-digit revenue growth into double-digit increase in operating income, which resulted in a 30% improvement year-over-year in EPS. In particular, we were encouraged by the strong flow-through to gross margin and operating margin. Our solid performance and improved operating margins resulted from strong revenue growth in EPD, improved IPD operations, consistent strong performance in FCD and reduced SG&A in each segment. We again demonstrated the earnings leverage available within our diverse and stable business profile, and the propensity for further operational improvements is significant. We remain committed to delivering value to our customers and shareholders by focusing on growth, operational excellence and volume leverage, thoughtful cost control and optimizing our capital structure efficiency, including returning value to our shareholders. We believe this formula of disciplined growth, improving operations and reduced share count is the key component to our solid year-to-date results in 2013 and provides the foundation for continued earnings leverage over the coming years. Speaking briefly to our end markets, some uncertainties remain. The world economy is fairly sluggish, and the unpredictable political environment creates delays in investment decisions regarding major, long-term infrastructure projects. Despite these issues, we are encouraged as Europe has demonstrated stability and signs of…

Thanks, Mark, and good morning, everyone. I, too, am pleased with our third quarter financial results. This performance is visible evidence of the operating progress we have made. Our disciplined investments in the operating platform are delivering returns. These initiatives, including improved quality, project management, aftermarket service capabilities, project pursuit and sales organization initiatives, will position Flowserve to meet or exceed customer expectations and capture opportunities from a strengthening cycle. Over the last year or so, we have talked about the importance of improving our key metrics and processes. One area where we have made significant progress this quarter is with on-time delivery. During the third quarter, we drove our past due backlog below 6%. This is a quarter level not seen since 2009. In a continuous improvement environment, we recognize that our work is never complete. We still have working capital and cash generation goals to achieve. But with our recent steady improvement of DSO and on-time delivery, it gives me confidence we are pulling the right levers, giving our people the necessary tools to reach our goals and will enable a high level of performance going forward. Our strong operating performance also helped drive impressive gross margin expansion. This increase occurred in spite of a somewhat lower aftermarket percentage. We also generated outstanding flow-through as our focus on controlling costs resulted in lower SG&A across our segments and allowed more of a top line growth to result as income. Sequentially, we also had a sizable increase in the shipments of legacy backlog. Turning to our order activity. We remain optimistic. Third quarter bookings were up 3.7% year-over-year, driven by growth in all regions, except Latin America. EPD bookings were the highlight within our segments. EPD increases total bookings by over 20%, primarily driven by 53% growth in original…

Thank you, Tom, and good morning, everyone. Mark and Tom have pretty well covered our operational overview and business outlook, so I'll quickly discuss our financial results in greater detail. While Flowserve's value proposition is much more than any individual quarter, we are pleased with our reported results and continue to gain momentum. We generated strong leverage off solid revenue growth of 5.4% on a reported basis and 6.4% on a constant currency. This brought our year-to-date constant currency revenue growth to 4.9%, which is right in the middle of our 2013 revenue growth target range of 4% to 6%. Our OE to aftermarket sales mix this quarter shifted 1 percentage point to 62% OE versus last year, which pressured gross margins. Looking at margins. As we indicated last call, we expected third quarter gross margin pressure in EPD, which occurred as we shipped a sizable amount of previously delayed legacy backlog. Offsetting this and the lower aftermarket sales were strong gross margin performance in IPD and FCD, which together, enabled impressive gross margin improvement of 100 basis points. This improvement demonstrates the impact of our bidding discipline and selectivity. It also reflects the solid operational improvements that Tom discussed. Turning to SG&A. We drove a reduction of absolute dollars spend in each segment, excluding corporate. This resulted in a decrease of 70 basis points in consolidated SG&A as a percentage of sales, and was driven by disciplined, thoughtful cost control and solid leverage, notably in EPD. We continue to focus on our longer-term goal of driving additional leverage from this expense as we target SG&A, as a percentage of sales, to be consistently in the 18% range. The initiatives we are currently executing, combined with a growing top line, should keep us on pace to deliver on this commitment…

[Operator Instructions] And our first question comes from Hamzah Mazari from Crédit Suisse. Hamzah Mazari - Crédit Suisse AG, Research Division: The first question is just on some of these larger projects, Mark, could you maybe comment on how you plan on balancing, taking on lower margin OE work with the potential of potentially getting the lucrative aftermarket revenue stream from that versus just completely walking away from some of these projects?

Well, I mean, that is an essential part of our sales and operation process when we look at a project opportunity. So to give you an example on 2 different types of projects, on a water project where we know there won't be a lot of aftermarket attachment, we've got to get our economics in the original equipment bid. If you look at a project like we did in the Middle East, the Yanbu one, which was very competitive, had little economics on the OE side. We're going to build a QRC near that facility and be able to harvest the aftermarket for years. So our process is designed to look at really the long-term economics. We look at it as almost like investing in a bond. And you look for the type of returns you're going to get over the horizon of your investment, keeping in mind some of these investments will be out there for 20 and 30 years. Hamzah Mazari - Crédit Suisse AG, Research Division: That's very helpful. And then any comments on the uptick you saw in EPD bookings? Specifically just your thoughts around these medium-sized projects beginning to hit versus some of the larger projects that maybe some of your competitors have said have gotten pushed out a bit?

Well, I mean, some of these mediums were a part of very large facilities. We were just very laser-focused in terms of the type of projects that we took on them. But the uptick is just that. It is the early stages of what you're seeing in the project opportunities that are out there. So this is typically the way a cycle goes through. The big projects never come as quickly as you'd like and -- but what you start to see are some of the longer lead time, more complicated-type products that get put out. They tend to be smaller orders. And then you move into the other stages of the projects. So it's a good -- definitely a good leading indicator as we look at the project opportunities over the horizon. Hamzah Mazari - Crédit Suisse AG, Research Division: Great. And just a last one for me, I'll turn it over. On the M&A landscape, any thought process there? You guys have been out of the market for a while. Has anything that's changed there?

No, and we haven't been out of the market. We've -- you haven't seen anything -- we've been fairly disciplined, but we're actively looking at opportunities for growth. Keeping in mind with the opportunities we have organically, we're going to remain disciplined and selective in terms of what assets we take on and how quickly we can lever them. What we look for is something that we can lever on our platform pretty quickly. If you look at Flowserve, we have a very expansive platform, a broad product set. And what we want to be able to do is really take this and drive quick revenue growth and margin improvement when we bring an asset in. We don't want to spend a tremendous amount of time with complex, multiyear integration.

Our next question comes from Scott Graham from Jefferies.

This is a question more for Tom than anyone. When the projects that you're referring to and have been referring to for a while finally start to get released by the OEs onto the EPCs, where do you think that happens first? I'm assuming your thinking there is kind of broad-based, but maybe more tilted toward North America? Are you thinking it's going to be more tilted towards chemicals? Just give us an idea of how you see the sequencing of this.

Well, if you take a look at some of the large projects, I mean, we're having some good activity now down in the Gulf Coast. You've seen some of the recent EPC announcements there on some of the ethylene business on the chemicals side. So my expectation is that's some of the larger projects you'll begin to see in the U.S. There's also some good LNG activity with the permitting process going on as we look at exporting out of the U.S. So I would say, you're going to probably see some of that and we've already seen some early indications with some of the EPC announcements. I would also indicate the FPSO activity has been good around the world, particularly in Brazil and some of the other areas. Combined cycle power plants, we're seeing a pick up there. And I would say, the pickup is certainly in the Asian region, the Middle East. And we've seen a lot of activity now in that area now starting to come into the U.S., particularly since the U.S. coal market is going through some changes at this point in time. So I would say that the chemical market, in particular, you'll see the projects, see it on the combined cycle power plants, certainly the FPSOs and -- what I would say, Scott.

Great. This is a question now for Mark. The increase in your footprint that you're referring to in some of the emerging markets, could you give us a little bit more of what you meant by that? Are you talking -- I assume you're talking QRCs, but I mean, headcount, where is it going, when is it coming?

No, it's actually manufacturing facilities, so that we can bring product to market in those locations. So in China, we're actually building our third manufacturing facility there. It'll be complete. We're actually opening it next month. In Coimbatore, we're going to open our third block of manufacturing in that area. So we'll have multiple facilities. The significance of that in terms of growth, Scott, is that, that's how you access those markets is you -- with local manufacturing, local sourcing. So when we think about how we enter into an emerging market, the first thing we think about is how we're going to migrate products over into that market. You got to create the manufacturing to do that because they'll only let you import for so long. And also, you need to be competitive. So what that means in terms of this capacity there, first and foremost, is it's going to give us more penetration, a better competitive footprint in those markets to grow the business there. We've got a lot of opportunity in China in terms of being able to grow that business. And then ultimately, these facilities, the secondary benefit is they help support our operations around the world in terms of LPO/SPO, so that we can drive our manufacturing costs down.

Okay, so it's nothing incremental versus what you guys have been doing. I guess, I thought that you meant something new on the board for QRCs. You're not saying that?

No, these are manufacturing facilities, what I was referring to. And the term is, "must be present to win," in these regions of the world. And we're expanding our presence not only physically, but in terms of the products that we offer in those markets as well. Now on the QRC front, those are very much driven by where the capacity that needs either physical capacity support or human support and that's where we basically will put those resources. So when you're looking over in Asia, you're talking about Malaysia and certain parts of the region there, even Vietnam where they need support, we have been adding QRCs in those regions.

Got it. Last question. This is kind of back to Tom, and you and I talked about this at the Analyst Meeting. I just -- you guys continue to show this resilience in your power business that's not really being seen on the, certainly, on the manufacturing side or the generation side, I should say, by others. You alluded just now to at the end of your comments that the U.S. business, you're kind of seeing what everyone else is kind of weak. What are you guys doing differently today or is it just that your footprint is able to garner new business. But you guys have been outperforming that market now for probably 2 years, I'd say. What is it that you're doing there that is really kind of enabling that?

I mean -- Scott, I mean, I think the #1 thing is we've got a very diversified portfolio not only of products, but of assets on the ground in order to service those markets locally. So I would say that, that's one of the biggest things. The other thing I would say is that we have been active obviously in India and China and that coal market is still doing pretty good there. The nuclear market, we've maintained as we've discussed before, all of our certifications over the years, even though that, that market has been going through some changes. So as those revamps and upgrades have now switched on the nuclear side from all the new builds that they were going to do maybe to those revamps and upgrades, recertifications, we're right there with our assets to be able to do that. The solar market, we're still seeing the solar market being active in Spain and Africa. And obviously, we have facilities there. And then lastly, even though the coal market is going through some changes on a worldwide basis and we're seeing some aftermarket pressures certainly in the U.S. on that, we see a pickup on the combined cycle power plants coming because of the low cost of natural gas. So I would say it's a diversification of our assets and products and some movements in the markets as I've indicated.

So, Scott, one thing to add on, if you look at one of our presentations from a couple years ago, we said our business is linked to global secular trends around population growth. With the broad product opportunity around the world, what it allows us to do is to tilt into those secular trends as opposed to what may be a more episodic trend.

Our next question comes from Mike Halloran from Robert W. Baird. Michael Halloran - Robert W. Baird & Co. Incorporated, Research Division: So first, on the margin line, obviously, really strong performance there. Could you just talk about your view on the sustainability at these levels, particularly EPD, FCD, where there was some very strong leverage that you saw in the quarter. Anything to suggest that on a forward basis, this isn't a pretty good base to build off of?

You know me, Mike, I won't guide specifically on margins. But go back to our statement that we made at the beginning of this year around propensity in our business. And I think an important message here not only in terms of what you're seeing in the financials, but our ability to compete for opportunities going forward is the platform is improving. And so what you are seeing, particularly in EPD, is that we've seen some of the facilities start to execute better, not all of them. Some of the facilities are starting to execute better, which helps them penetrate the customers better. And then you add to that good fixed cost leverage on the SG&A line, and that's what drives margins. So despite the fact that gross margins had decreased, we get good operating leverage on SG&A. And that's the way that business is. Keep in mind, a lot -- just -- if you take a step back and think about where a lot of the costs in a long project are embedded in cost to sales in the gross margin line because you allocated to the specific project. Turning to IPD, what we are pleased with is that we saw good gross margin improvement, which is reflective of the improving operations. It didn't get the fixed cost leverage because on the sales side, that was expected. Our priority with IPD has been improving the platform. Because if you grow a business when the platform isn't ready for it, it's tough. You let your customers down. We've seen that movie. So now what we're focused on in IPD is driving growth in that business so that we can continue to get the operational leverage in the gross margin line but to start to cascade it on the G&A line.…

Well, I mean we're all -- especially with the capacity that we're adding, we're always looking at how we optimize our capacity at a holistic level and we'll always continue to do that. And that may be what products do we put into some of our mature market facilities that we can leverage the LPO/SPO strategy? So we're adding product capabilities through R&D and development. But we also look at, as we've done, we consistently are looking for how we improve it in those facilities. I think in terms of the operational improvement, we still have probably 2 or 3 years to go to get to where we expect this company to be. Michael Halloran - Robert W. Baird & Co. Incorporated, Research Division: That's great. And then the last one is, could you just talk a little bit about industry pricing dynamics, how much stability that you're seeing there? Obviously, internally, you're doing a lot better job of being more selective, but how does the landscape look beyond just what Flowserve's doing?

Well, I think there's -- as I mentioned, there's the external and the internal. The external is -- is you anticipate with these projects, the first one to come out tend to be competitive. Because as we've had this discussion, everybody's anxious to see these, they want to grab them when they -- when these opportunities come out. So that's the external force. What will happen though, is over time with the cadence of the projects as they come, they tend to become less competitive. They're still competitive, and they were competitive in '08 as well. I'm not suggesting they're not. I think the internal thing is equally important. Our ability to compete. There's still a lot of leverage we're pulling in this business to make sure we can drive our efficiency to much higher levels, which enables us to certainly compete better. And I think that's a good example when I went back to IPD. Getting that platform improved helps them compete better and it's the same thing in EPD as well. What we've seen is the good consistent performance in FCD has enabled them to really compete well and respond well and drive growth. So those are the aspects of competition. We're operating our business if it's going to remain competitive because good competitors out there, what we see in a lot of the competitors that you are certainly familiar with is, I think, they're driving discipline as well. A lot of things we've been talking about, we hear them talking about as well, which is not a bad sign for our industry. But these first projects will tend to be competitive.

And our next question comes from a Brian Konigsberg from Vertical Research.

I just want to touch on EPD, specifically on the OE part of the business. I guess, the one thing that really kind of stuck out to me today was how strong the OE sales were in the quarter. And you did have very strong orders in the quarter as well, but kind of looking over the past year, I mean, the order profile has not been that strong. I always kind of sense EPD being a fairly long-cycle business, 12 to 18 months from order to delivery. And so the Q3 results really does not reflect that type of pattern. I'm just curious, is there a shorter-cycle complexion to the business that maybe I'm just missing? Can you -- if you could touch on that, that would be helpful.

Over half its sales is aftermarket. So -- I mean, we need to always remember that, that over -- and that's a very, very short-cycle business. So you've seen that consistent growth in the aftermarket. And while it's not double-digit order growth and sales growth year-over-year, it is very high margin. So it has great contribution to the gross margin and to the operating margin line.

Right. But, Mark, I was specifically referring to the OE part of the business, though, kind of comparing the trailing 12-month sales order profile versus what you did in sales in the quarter, on -- specifically on OE. It just does not kind of jive with what we've seen -- jive with the patterns on the order front. And I always got the perception that it was a long-cycle business. So the performance you had a year ago would be kind of showing up today.

Well, a couple of things, the duration of their backlog as we moved it out has certainly shortened. So fair to say that the long-cycle nature as we've taken some of these legacy projects out has certainly become shorter. They do have some shorter OE, run rate OE business, absolutely in the business. But I think that's part of what you're seeing is the -- and now some of these medium-sized projects come in, in the order book. So I think as you look at that, the long-cycle nature of that business is working through the cycle going back to 5 years ago, right? They were heavily loaded with long-cycle backlog coming into 2009 and 2010. It was high-priced. That carried them and their margins for a number of years. Then there was still long-cycle business at that point in time and -- but it was -- the economics were significantly different from the '08 time period backlog, and that's starting to run through as well. We had quite a bit of that in the backlog last year. So that's starting to run through right now. But with their improved execution and some of the opportunities that we're seeing, they're starting to fill that backlog back up. The difference is, it's better quality, it has better economics and we're executing on it better. Did that answer your question?

Yes. But just kind of looking -- maybe taking a step further, I know you don't want to give 2014 guidance, but kind of looking at the order trends in the first half of 2013 on the OE side, I mean, you were down between 10% and 15%. I mean, conceptually, are we thinking that the EPD, OE sales could kind of level out over the next 12 months even though your order profile continues to improve?

Yes, you're right, I don't want to give guidance, but I think you hit it on an important trend. We were sitting here in the fourth quarter of last year, and if you looked at the prior 3 quarters of sequential bookings, they were down. And go from that point, now you look over the last 3 quarters, sequential bookings have generally been up, and the same thing is in EPD as well. That's a good sign for sales growth opportunities in the future. But you're right, I don't want -- we don't want to get ahead of ourselves. We typically put out guidance right at the beginning of the year.

And our next question comes from Charlie Brady from BMO Capital Markets.

Let's talk about IPD for a second. I guess, you touched on this a little bit in a prior question, or an answer to a prior question about the growth platform. But I mean, you're talking about it on a 300, 400 basis points upside over the next couple of years from where we are coming out of Q3. And I'm just wondering if you can maybe -- what are the growth initiatives that get you to that kind of -- what is significant upside in the margins over a relatively short period of time?

Well, the #1 initiative is and continues to be improving execution. A lot of the IPD business is short cycle. And if you can't take care of your customer where [ph], they'll go somewhere else. So that's definitely been the #1. We wanted to get this thing improved before we started to grow it. That was a priority. Now we're turning our sights definitely to growth. So when we look at opportunities, product development, one of the areas that we expect to see growth in is, remember, we talked about the ISO chemical pump, some other product development areas, one of the questions earlier was on inorganic opportunities. Some of the assets out there you see could fit into this segment fairly well. But the key is going to be around execution because if you respond very quickly to a customer, they need it and you can actually get some power -- pricing power in doing that. So it is and has been around execution. Some of the -- we have actually, in a sense, given up some growth to prioritize execution over the last couple of years. But I think now we're in a good position to drive it.

Okay. And just to one of your points on the inorganic growth opportunities. So as you look out into that pipeline, are you saying that there are acquisition opportunities where the margin profile of those potential deals would be margin-accretive to IPD when you roll them in?

That's a good premise. We look across, really, many of our segments in terms of many of our business platforms, so we just don't isolate it to one. I was just responding to your specific question about IPD. But that's absolutely the case. What we want to do is -- margin accretion is important and everything like that, but our primary premise on looking at an acquisition is getting an internal rate of return. And generally, we like 15% or greater, which ultimately should correlate to margins over a period of time. But as you know, sometimes, certainly with purchase price accounting, it takes a while to get there. But we look in terms of internal rate of return in the business. And so what we wouldn't want to do in IPD is something that we think has good margin improvement opportunities is to pass it up just because it won't get us the margins we need next quarter. That would be playing it too short term.

Okay. And if we just look at EPD for a second and a little bit back on the prior question about the OE orders, which were up pretty strong. I apologize if you covered this already, can you give us a sense of kind of end market of where those are coming out of and duration of the OE orders that you took in the third quarter? Or when they'll ship?

Sure, sure. I mean, the concept of run rate business, and we talked about a medium-sized order, really correlates to duration. So it's fair to say that you compare year-end backlog to where we are right now, the duration is shorter, especially as we moved some of what we called legacy and past due backlog through the system, which I can assure you has -- had very little economics to it. So the point to that is, we're still in what I'd call more of a shorter-duration-type booking environment, but we'll expect the longer ones to start come in.

Yes, I would also add on the EPD side, I mean, just looking at some of the industries, the chemical bookings were very strong. The oil and gas bookings were also up. We had the power bookings, if you take a look at the -- we actually had -- the power bookings were up because of some desal projects that we're working on. And then if you looked at the regions, with the exception of Latin America, all the other regions were also upping the business. And the other good thing on the large projects is we're also seeing good FEED and pre-FEED activity on the large projects. So we're continuing with that trend. The EPCs are in there with the FEED work. We're also seeing now some of that FEED work result in bidding opportunities where the EPCs are now winning those larger projects and going into the bidding stage, particularly in the oil and gas, as well as in the power stage.

And our next question comes from Jamie Sullivan from RBC Capital Markets.

A question on refinery maintenance. You mentioned that that's been deferred. When -- in a typical cycle like this when margins are strong for them, what -- when would you usually see that come back? Is that sort of a next year event when you would see that activity pick up?

Well, I mean, there's -- weather, especially in the Gulf Coast region, isn't a factor like you'd see in other areas where they have to do their maintenance during -- like in the power industry, they have to do it in the cool spring or in the fall. But basically, what you see in this industry is when margins expand out, they want to refine as much as they can because -- and that's their opportunity. So what they'll try to do is push out the times where they ultimately have to take it down. They can only go so far because the highest cost to them is if something goes wrong, if something breaks down in the facility. So -- and again, what you've seen right now with oil costs had come down a little bit, especially in the Midwest, that's going to push their margins up a little bit. So they'll continue to try to push this maintenance as long as they can, but it's really going to be more site-specific. There are certain critical points where they won't go past in terms of maintenance because then they run the risk that the facility shuts down on them. But in general, what you see is when refining margins gap out, spend will get deferred. And we've been living with that for a couple of quarters now. As Tom mentioned on some of what you've actually seen, we've been able to grow our aftermarket bookings despite the fact that some of the U.S. fossil power plants have been shut down.

Right. And then on SG&A, I know your target out for 2015 is in the 18% range, I think. You're getting great leverage there. Is the 18% sort of a long-term kind of run rate for the model? Are you starting to see more structural leverage maybe from some of the initiatives you've been putting in place over the last year or 2?

I think, in general, what you've seen to this point is a shift, not a change, but a shift in the culture. And these things take time. It can often be humbling in these roles to know that some of the changes you make take years to do. So we've seen some of that, I think, really getting down into some of the initiatives. We'll start having these opportunities over the next couple of years. But it's really reflective, we think, of driving a change in the culture, executing some initiatives, but investing in the business. So what -- companies can drive these things down to very, very low levels if they're willing to compromise some opportunities, some high-return investment opportunities in the future. We don't want to do that. So when we look at that objective, we took into consideration the change in the culture, driving some initiatives, the benefit of One Flowserve, which helps us leverage our G&A, but also where we wanted to invest.

And then one last one on cash flows, showed some improvement there in DSOs. Can you maybe give us some more details on how you've been implementing those improvements so far, kind of what we might look for over the next 2, 3 quarters in terms of implementation process or milestones? And maybe if you could add some color on the inventory turn side, specifically with OE starting to pick up and how we should think about that?

Jamie, it's Mike. I think we're pretty pleased. Again, I think, as Mark said, it's certainly a shift in the culture and we're not there. We're in the implementation phase. As you know, last year, we spent a lot of time kind of assessing the situation, and so now it's implementation. And so as I've said before, the easy part has been completed, which is the assessment. So now we know what we need to do, and now, we're in the implementation. But it's a big network. We've got a lot of locations out there. So I think you'll see incremental improvement, and that's why we set long-term goals. We're probably a little bit behind where I thought we would be, probably 1.5 years ago when I set these targets. But I do see some of the culture starting to shift, and I see the importance that both the financial organization, and importantly, Tom Troop's [ph] operational organization is putting on, on working capital and managing that working capital. So that's really what it's all about. It's process and procedure and culture changes that we're doing, both on the receivables side, as well as the inventory management side. We're getting guys in from all part of Tom's operations involved, both from the procurement side, doing a better job of on-time procurement. We're getting project management folks involved on that as well. And also, it's really throughout the organization and all. So I don't think you'll see a sea change quarter-to-quarter, but what we're hoping to see is incremental improvement quarter-to-quarter over the next 1.5 years or so.

Our next question comes from Steven Fisher from UBS.

Just wondering what's your base case assumption around when you'd see book-to-bill for the company start to more notably expand beyond 1x? And is that literally Q4, Q1, or is it more kind of mid to later 2014?

Steven, nice to meet you. I think we met you one time before. We don't go -- being not a quarter-to-quarter business, we don't go specifically and give book-to-bill or any kind of bookings guidance in the business. I think if -- just to help you understand growth opportunity in our business, frankly, if you look at the backlog at the end of 2011, it was higher than the backlog at the end of 2012, and yet we've been able to grow in revenue -- grow revenue this year. This is the issue of the duration of the backlog, how long it is down [ph] there and how long it takes you to roll through your P&L on the revenue side. So a lot of our backlog now has a shorter duration, shorter cycle. And we're pleased with the earnings trends over the last 3 quarters. So it's a good way to think about our business. And when we start booking these projects, especially the big ones, you do take some POC revenue on some of them. So you get the benefit of some of them as they start to come through, but they'll tend to hang in your backlog a lot longer. That's why we've been so focused on the growth of our run rate business and our aftermarket business. So hopefully, that can help you think about how we think about growth overall in this business. I think from an earnings standpoint, what we don't want anybody to underestimate is our contribution rate of an incremental dollar revenue to the gross margin into the operating line as well, gross profit and operating line as well. So with the improving operations, with our cost controls, we're able to drive growth in our earnings. This year, it's been multiples of what you've seen in the revenue line. So hopefully, that helps you think through this in our business because what -- the duration of the backlog is how quickly it'll convert into revenues.

Yes, that's very helpful. And in terms of just understanding lead times a little bit better, because you referenced some of the U.S. Gulf Coast petrochemical awards that have already been made at the EPC companies, when do those start to hit your order books and -- or those of your competitors?

Well, it depends. In the competitive landscape, it depends on the lead times required for the products. So there are some products in a large refinery, so gas compressors, which have a much longer lead time and some of our products as well. Even within our product spectrum, we have different lead times. Often, we talked about the valves tend to be some of the shorter lead times in these. So it's really going to be dependent on the products relative to our industry. The complex equipment tends to be more early on in the project because they require long lead times of manufacturing. Having said that, what we've been focused on, and this was my comment earlier about our ability to compete and respond, is we saw it happen in the pipeline industry in 2011, and frankly, we didn't fully participative to the level we wanted to because of lead times. The shorter lead time on the margin got you the project, even with some pricing power. So we're taking the approach that we're not going to rely on lead times in and of themselves to take care of our business. We're going to drive for the shortest lead times possible to be responsive.

I will now turn the call back over to Jay Roueche for closing comments.

Thanks, Paulette. Again, we very much appreciate everyone for participating in today's call and for your interest in Flowserve. If you have any follow-up questions, please don't hesitate to call Mike Mullin or myself. And, operator, we've now concluded today's call, and thank you.

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