Good morning. My name is Wes, and I will be your conference operator today. At this time, I would like to welcome everyone to the ITT Corporation Second Quarter 2011 Earnings Conference Call. [Operator Instructions] I will now turn the conference over to Tom Scalera, Vice President of Corporate Finance. Please go ahead, sir.

Thank you, Wes. Good morning, and welcome to ITT's second quarter 2011 investor review. Presenting this morning are ITT's Chairman and CEO, Steve Loranger; and ITT's Chief Financial Officer, Denise Ramos. I'd like to highlight that this morning's presentation, press release and reconciliations of GAAP and non-GAAP financial measures can be found on our website at itt.com/ir. Please note that any remarks we may make about future expectations, plans, prospects and other circumstances set out in our Safe Harbor statement constitute forward-looking statements for the purposes of the Safe Harbor provision. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including those discussed in ITT's Form 10-K, as well as our other public SEC filings. Let's now turn to Slide 3 where Steve will provide an overview of our results, as well as an update on our transformation progress.

Thank you, Tom. Good morning, and I'd like to thank all of you for joining us today. We are exceedingly pleased with the strong revenue growth and strong operating results that we delivered in the second quarter. Our teams have continued to drive growth while flawlessly executing on our plans to separate into 3 publicly traded companies later this year. We delivered robust growth across our commercial businesses, and our project pipeline is continuing to expand globally. In defense, we held revenue steady with a strong prior year, and we raised the full year defense revenue outlook despite the recent uncertainty in the overall defense market. Our second quarter adjusted EPS of $1.18 grew 4% compared to the prior year, exceeding our prior guidance by $0.06 due to solid operating performances and stronger-than-anticipated defense service revenue expansion. In the quarter, Fluid and Motion and Flow Control continued to deliver strong results. Fluid posted total revenue growth of 26% and organic revenue growth of 9%. Motion and Flow Control revenue improved 7% organically, along with an operating margin expansion of 220 basis points. Defense's top line performance was nicely combined with a 47% organic order growth rate, leading to $150 million increase in our defense revenue guidance. Despite the many headwinds, our defense business is now projecting revenues to decline only 4%. However, keep in mind that these revenue improvements are entirely driven by a service revenue component that will pressurize margins in the quarter and for some time to come. And finally, just after the quarter closed, we were excited to announce the acquisition of YSI, which further expands our growing position in the global analytics market, which Denise will cover in more detail shortly. So let's turn to a more detailed transformation update now on Slide 4. This now…

Thanks, Steve. Let's turn now to Slide 5. This quarter, we delivered total revenue growth of 10% and organic revenue growth of 4%. The organic improvement was led by Fluid's 9% growth and Motion and Flow Control's 7% growth, reflecting strength in the emerging market oil and gas, global dewatering, international treatment, automotive share gains and aerospace aftermarket. Defense was flat due to significant growth in our service business that benefited from a ramp-up of activities and additional task orders on several recently awarded long-term contracts. This was offset by expected reduction in domestic SINCGARS and jammers. The second quarter total organic order growth was 21%. Defense orders increased 47% compared to a weak prior year, due to strength in night vision and services. Motion's organic orders grew 6% due to strong global industrial and auto demand. Fluid organic orders also grew 6% due to strong demand in industrial process and dewatering markets, which was partially offset by Southern European weakness. Second quarter adjusted EPS improved 4% to $1.18, which exceeded our prior guidance midpoint by $0.06 due to solid operating performances, higher defense service revenue and lower corporate costs. Segment operating margins declined 140 basis points due to a higher mix of low margin defense service revenues that offset strong productivity and acquisition-related margin improvements in the commercial businesses. Now let's take a look at Fluid's results on Slide 6. Total Fluid revenues improved 26% to $1.1 billion. The strong performance included 9% organic growth and continued benefit from the Godwin dewatering acquisition. Fluid's total orders improved 23%, and organic orders increased 6%. At the Fluid value center level, organic revenue at industrial process increased 16%, due to a large emerging market oil and gas project that was delayed from Q1 and strong industrial aftermarket demand. Industrial process' organic…

Before we start the Q&A, if anyone is having any difficulty accessing the slides, they are available via the website at www.itt.com/ir. Okay, Wes, we're now ready to start the Q&A session.

[Operator Instructions] Our first question comes from Jeffrey Sprague of Vertical Research.

Steve or Denise, can you give us a little more color on defense then in the back half? How do you get to that type of annual margin number based on what's going on with the mix, and some color on how Q3 should progress into Q4?

Sure. As what we saw last year also -- if you go back to last year, you saw that our products business, we ended up selling more of our products in the back half of the year than in the first half of the year. And so we expect that same thing to happen as we go into the back half of the year. So I talked about the very strong service component that we had in Q2, which was about 55%. So as we go into the back half, we're not going to see that high of a percentage of service. It will now become more products in the back half of the year.

Can you give us a sense of what the all-in first-half mix product/service was and what you're expecting in the back half?

In the back half, Jeff -- it's Tom Scalera. The back half is going to be more in line with what we've seen historically. So we are clearly in the process of changing the mix within the defense business. You saw it play through in Q1 and in Q2. Q3 will have a higher mix of products than we've seen on a year-to-date basis, and Q4 will look a little bit more like what we've seen in the prior year's Q4. But I would caution you on a go-forward basis, the aggregate long-term margin for defense is going to reflect a higher weighting of service than products.

All right. And then just taking the negative mix into account, but then thinking about service itself and what's going on there, how contemporaneously can price adjust in those service contracts? What you have at committed price, so to speak, to the extent such a thing exists versus new stuff coming on a lower price, how we should think about that playing on -- playing through.

Jeff, this is Steve. We have not seen a lot of dynamics in elasticity of pricing yet. There's been some discussion on that. But we've been able to maintain what I would say is a traditional pricing model as we take the contracts and execute on them. So right now we're not seeing anything changing in terms of existing contracts. Clearly, for the new contracts, to your point, we are seeing some pressure in terms of reduced margins on the brand-new contracts, and that's just all part of a normal competitive game.

And then just finally, if you could give -- switching to Fluid, just a little additional color on what you see playing out in the muni markets, in particular on water and wastewater into the back half in particular.

Sure. When we look at the municipal market for water, what we're looking at is from the first half to the second half, we grew in the municipal market in the mid to high single digits. And we would expect to see that same type of growth rate in the back half. Now when you look at it on a dollar basis, we are expected to have stronger sales in the back half of the year than we've seen in the first half of the year. And part of that is just because some of these municipalities and others end up spending the budgets that they've had in place. So we're going to see growth rates in the mid-to high single digits, but we're going to see the revenues build as we go into the back half of the year. And we're seeing just continued positive signs in Northern Europe associated with that, too.

Your next question comes from Scott Gaffner of Barclays Capital.

So just a follow-up on Fluid here a little bit. So if we think about municipal spending, sort of, the dollar is higher in the second half. What should we think about industrial process, though, because you had the big gas shipment in 2Q? I mean, should we think about that organic growth there coming down considerably in the second half?

No. In fact, it's just the opposite with industrial process. So industrial process is one of our later-cycle businesses. And we've been seeing a lot of strong growth and activity associated in that business. So in the first half of this year, it grew mid to high single digits. In the back half, we do expect to see double-digit growth in our industrial process business. So we're happy with what's happening there. A lot of that's coming through on this project business. It's the longer-cycle project business that we have. And a lot of that is occurring in emerging markets and overseas. So it's a very nice story with industrial process and the growth that we're going to have as we get into the back half of this year. Overall, for the year, industrial process is going to be up double digits.

Okay. And then just going back to the defense margin, I think, you said, Steve, you said that you see for some time to come this shift into services versus products. I wonder if you could sort of give us a little bit more detail there. And then Tom, you sort of mentioned that the margin could be at the lower end of the -- what I had at a longer-term range of 11.5% to 12.5%. Should we think the 11.5% or maybe even below that longer term now?

Yes, a couple of comments there. With respect to the mix shift, as deficit budget pressure is put on to the defense budgets, coupled with the continued withdrawal in the Middle East, that has a reduction in both some of the traditional products that we're shipping to the Middle East, things such as the SINCGARS and hopefully night vision. And then also it puts pressure on the new program starts. But on the flip side, there continues to be even an expanding government appetite for outsourcing in the service component. And so areas in the operations and maintenance and some advanced engineering areas, we see as incremental growth opportunities, and I think what we're actually demonstrating right now as we speak is a strong validation of that strategy. So we're going to continue to aggressively compete for service contracts. And while we have a lot of attention on the dilutive effect of operating margins, it should be pointed out that this incremental revenue does bring nice incremental income and very, very good working capital statistics and very high return on investment. So as a complement to the pressurized side of the business on the products side, this service revenue is really a nice opportunity that helps shore up the overall defense portfolio. And we just think that this trend is going to be in play for a while, which is why when you analyze the operating margins, in contrast with the 11.5% that we've been giving you traditionally, that was under the assumption that we'd maintain kind of a 60% product, 40% sort of services. And right now, we're looking at that mix over the future planning horizon to be almost the opposite, more like 40-60, and that'll take the operating margins down maybe another -- in the 50 basis point range over a long period of time. Now remember the defense team has a lot of opportunity continued with cost plus. In the fixed price mix, remember, we're about 50-50 in that area. So we do have incremental productivity opportunities in that dimension as well. And Dave and the team will continue to be doing restructuring, so there's still plenty of ammunition left in the defense portfolio to be able to continue to produce an effective business for the future.

Just one quick clarification on YSI. Is that included in your revenue guidance? And are there any anticipated charges that you'll be taking in the third quarter around that or maybe even in the fourth quarter?

Sure. It is not included in our revenue guidance. And any charges associated with that, it will not be significant to the forecast that we have.

Your next question comes from Terry Darling of Goldman Sachs.

Steve, I wonder if we could continue down the discussion path around defense margins, just in terms of what the -- I guess you're talking about more like 11% margins given that mix shift sustaining. What are you assuming there in terms of margin, further margin deterioration on new services work there? Are you assuming productivity offsets that? And can you talk about sort of how much pressure are you seeing? Are you in the 5% to 10% range? Or is there really not a trend there yet we can identify because you just haven't seen enough contracts yet?

We're not expecting, Terry, any additional deterioration on the service. The primary margin dilution I referred to is just simply the mix shift. And whatever variation there is to the nature of your question, we believe will ultimately be offset by some of the productivity and strategies and other growth opportunities. Remember that we still have a very strong component in the defense business in the non-DoD. That segment is around 25% of our portfolio, and that tends to be pretty nice overall operating margins. And while we obviously had a slight slowdown on the international side due to global deficit concerns, over the long period we've got some outstanding technologies and capabilities where we're going to be able to continue to drive adjacencies. We've talked to you about some advanced technology that we are parlaying from the military, antisubmarine systems into advancing the state of brain cancer research with NovoCure. We've been driving a number of successful commercial obligations of composites. And we've got some nice programs in Japan, the Middle East on imaging, weather, payload and most recently landed some noise abatement contracts. So these contracts and the adjacencies continue to come in, and these are another offset in terms -- a positive offset in terms of operating margin expansion in defense.

Okay. Denise, can you comment on any changes in the outlook and just what the outlook is for margins in MoFlow in the second half of the year?

Sure. For MoFlow, we're expected -- when we get into the back half of the year, we're going to see some nice improvements on margin in the back half of the year for them. So we're expecting that you're going to see overall for the year, I think, it's pretty consistent with what we shared with you last time. I think we have 15.5, something like that. And so for the year, we're still expected to be on track with that.

Okay. And that's a significant acceleration in incremental margins at a time when most companies are talking about incremental cost pressures. Can you just talk about the drivers of that between mix, price cost, and I guess you should have a nice tailwind from cost cutting kicking in the second half of the year as well. But maybe just take us through why incremental have accelerated so much in the back half.

Sure. We are seeing just some continued nice productivity improvements. Typically, they build as we go throughout the year. And so we're continuing to see that as we go, as we get into the back half of the year. Some may be associated with price, but just in general, the activities that we have underway associated with that. And so we just see some nice growth as we get into the back half -- into the back half of the year and in that business. But the teams are doing well. They're executing well on the actions that they've had underway. And we expect that, that's going to continue. And then we still have nice growth in the aerospace, which is high-margin business for us, particularly the aftermarket component where we saw that growing at about 35% in the first half of the year. And so that helps us also as we get into the back half of the year.

Okay. And then lastly on water, I think you mentioned second half muni organic growth mid-single digits, and I'm just trying to square that up with the water, wastewater orders down 2%. Is it that the softness in water, wastewater is industrial? Is it just that there's just a lot of short-cycle stuff running through both? And so can't make that connection necessarily short term, or how would you connect those?

Last year, we did receive a large treatment order in the Middle East. So when you look at the orders on a year-over-year basis, that skews it. We actually were seeing good orders for WWW. And also remember that in Europe, you get the slowdown that happens in the third quarter. So we're not worried. We've seen good order growth, good connections with our customers going forward. And so we do expect it to build in the back half.

Your next question comes from Ajay Kejriwal of FBR. Ajay Kejriwal - FBR Capital Markets & Co.: Just on that $0.08 incremental restructuring and service mix in the second half in defense, maybe any more detail on how much of that’s the restructuring piece of it. And then maybe on the timing of that restructuring, is that related to the change in the service mix? Are you taking a more negative view on the deficit reduction in the macro that you're seeing on defense?

So on the $0.08 that we've talked about in the back -- in the revision in the guidance, about half of that is related to this mix shift between services and products. We are seeing some of the products getting pushed out into next year, and then we're seeing more service revenues coming through. The remainder of the $0.08, the other half, does relate to some potential additional restructuring actions that we may be taking in the defense business.

The other thing I'd like to add, Ajay, on that is, as I mentioned earlier, continued cost reduction is going to be a way of life on Defense. As any business works through market dynamics, they always have to adjust the architecture of their business model. And we haven't announced or in fact even defined all of the potential areas for cost reduction. But I can assure you that Dave Melcher and his team understand that they have to continue to become ever more efficient. We've been leaders in the defense industry in terms of our operating margin and our productivity. And notwithstanding the fact that we do that in terms of even giving back a huge amount of the benefit to the U.S. taxpayer as a result of lower overhead, we have been able to keep our defense margins at the higher end of the industry, and I can assure you that Dave and his team are going to continue to do that. Ajay Kejriwal - FBR Capital Markets & Co.: Good. And then on the analytical instrumentation, so you have a decent sized platform in there now. Maybe talk about the opportunities from here on. Is it extracting synergies across those 3 businesses and growing organically? Or you still feel there is acquisition opportunity out there? And also maybe talk about the return expectations on that platform.

Ajay, it's all the above. We're extremely excited by the analytical instrumentation business. Because of the essential nature of water treatment environmental consciousness and just the sustainability components in water, we're just seeing an ever higher demand for water analysis and water treatment control capability, which gives us a really nice organic opportunity among analytical instrumentation. The larger you get, the more you can parlay your technology from one particular sensor to another sensor, from one application to another application. And so the breadth of our business now is enabling Chris McIntire and his team to actually be accelerating organic product introductions, sort of across his own internal channels. The third area that's exciting is the fact that as you know Xylem today, the new Xylem, has the largest selling and distribution footprint of any water company in the world. And while today a lot of the analytical instrumentation goes through unique distribution channels, we have a very, very strong access to all water customers, and we're going to be able to leverage the sale of those products through the balance of our Xylem selling and distribution system. And finally, this is an industry that is rich with acquisition opportunity. And now that we've got more of a critical mass there, we expect to continue to maintain our capital allocation, focusing on inorganic or acquisitive growth. So all in, we've set our sights on a much, much stronger analytical instrumentation business and one which we can create synergy from organic growth, cross-selling through our Xylem distribution system and acquisition.

Your next question comes from Deane Dray of Citi Investment Research.

First question related to the breakup costs, and the initial $500 million has been reaffirmed a couple of times, and was hoping you're in a position where you can start providing a little bit more detail around that number. Some of the bigger components accounting, legal and so forth. Can you provide some more insight into that number?

A couple of big components I can give you -- we don't have the detail, but 15% to 20% of it is going to be in the range of fees, and we have legal strategic banking, auditing, benefit compensation fees, and all of that goes into it. A very significant piece of it will actually be the bond restructuring that's contemplated in the 40% to 50% range. We haven't definitized that. We're underway. That’s still one component. And then the other major piece of that is the tax friction cost. And as we get close to spin, we'll be able to detail that more, but those are the 3 biggest pieces of it right there.

Great. And then on the appendix, there's some really good color there. And I appreciate you provided that because there are some moving pieces between Motion and the Water business. But 2 data items jumped out to me, at least. One was on frac-ing, and the other was on ballast water. And from our perspective, these are the 2 fastest-growing new businesses within water. So the first question on the frac-ing opportunity, not surprised you're doing dewatering because there's a whole -- the essence of frac-ing is a water process. The gas part is just more of a byproduct. Do you have any ambitions to do any of the treatment of the frac-ing water, both the flow back and produced water?

Deane, we couldn’t be more excited by hydro frac-ing opportunities as the quest for energy sources becomes higher and higher throughout the world. We are already working with a number of energy companies and pipeline companies to design and to supply components into the gas frac-ing system. Currently, it's mostly traditional line of pumps such as dewatering and valve systems. And as we get more sophisticated in looking at this as an overall solution approach, we are currently investigating both the treatment technologies as well as the overall systems integration opportunity. Not surprisingly, the energy companies are not in the water business, and they do look to a company that has a capability of ITT to say can you provide a full suite of equipment and services to manage the entire water solution, which as you just referenced, is a very significant challenge in the frac-ing system. So we are engaged today in terms of the supply of individual components. And we are working ambitiously to see what we can do to take on a larger system. In the area of ballast treatment, we've been working with various navies and other ships in the world, and we already do supply some ballast treatment technology. In fact, we just won a very nice contract, several million dollar contract in Germany with respect to ballast water treatment, and we'll be continuing to do that. And for those that are not familiar with this, I'd just add that to maintain proper buoyancy and weight and balance, ships frequently move literally tens of thousands or hundreds of thousands of gallons of water in various places in their hull to improve stability. And this water needs to be treated when it's discharged because of contamination in the ship, and it needs to be treated when it's put in to make sure the ship's hulls are safe. And this is an area that is very exciting to us.

It's interesting, on the frac-ing side, you said that your ultimate goal is to develop a system solution. We agree that's where the bigger platform opportunity would be for you. And then similarly for ballast, it sounds like the WEDECO system -- WEDECO is more of a component that you're delivering now. Do you have an opportunity here to develop a standalone system for onboard treatment?

Deane, I don't know the answer to that question. I do know that WEDECO is involved, as I mentioned. Right now my understanding is we are primarily an equipment supplier, as you mentioned. And I’ll just have to take an action item to get back with respect to looking at the overall ballast system solution as you referenced. Those are the sort of things that we think we can leverage. When the new Xylem gets off and running, areas of sustainable infrastructure, environmental recycling and remediation, ballast treatment, frac-ing systems, dewatering systems, these are all things that we do have an ambition in the world of water to take to the next level. And we've got a lot of – we’ve built a lot of capability to be able to aspire to that vision now.

Your next question comes from Jim Lucas of Janney Capital Markets.

This is Mike Wherley standing in for Jim. I was wondering on MoFlow, what's the thought process around acquisitions after the spin? And will it continue to be internal growth focused?

This is Denise. In looking at MoFlow, we've just been going through a very detailed strategic planning process for new ITT and looking at the various opportunities that we have. And first, let me tell you, the one thing I am very excited about is the fact that we do have tremendous opportunities in many of these markets that we will have going forward with. So I'm very excited about the future prospects of these businesses. And I look at it in 2 ways: It's going to be organic where there are things that we're going to continue to make some investments organically, and I see that we have an opportunity to do maybe more of that than we have in the past as we build these businesses. And then when we look at acquisitions. We will be looking at acquisitions. We will be looking at acquisitions that will be close to the core for what we have. And the reason we can do that is because we have great businesses in new ITT. So we really have an opportunity to go out and build these businesses in a very strong way by investing organically and investing in acquisitions close to the core. It's going to build out around the key capabilities that we have and that we demonstrate today.

Okay. That helps a lot. And then on the FAA next-generation program, are the current legislative problems around reauthorization, are they creating any long-term issue for that program's ramp-up?

Great question, Mike. And at this point in time, we don't think so. We could see some minor pressure coming out of the reauthorization and deficit budget. Just to be realistic, I say that. But on the flip side, we've actually seen the opposite effect right now. The United States government, as well as the entire air traffic community, has firmly gotten over top dead center on understanding how critical the NextGen technology is to future economic growth in the United States. And the government knows how important it is to fund these things. And I'm pleased to say as an example that the several billion dollars of funding that we have talked about in our ADS-B installation and SE2020 type contracts to advance the engineering associated with NextGen are essentially on track. We may see some minor slowdowns in this system, but at the end of the day, the government knows that the only way to improve throughput capacity in the air traffic management system is to get this NextGen system in. It's going to be expensive. It's going to take a few years, but I do sense a visceral government commitment that's pretty broad based to be able to continue this on track.

Okay. And are you getting any positive feedback on that financing arrangement you announced a few months ago?

We have -- that's the Nexa partnership where we were trying to enable the early ability of the airlines to install the necessary equipment on a government-backed security lease so that we could get the entire network up and operating. And yes, we have received favorable feedback. It's still not finalized. We have been working throughout the House and various administrative entities, as well as the FAA, to be able to finalize these plans. But as a generality, the notion of a public/private partnership to be able to accelerate this implementation is really well received. And remember, when we do this, we're going to create 33,000 additional jobs in the United States with this NextGen. And right now this kind of productivity and this kind of public/private partnership is being pretty well perceived.

Your next question comes from Robert Stallard of Royal Bank of Canada.

I thought if we could start with defense. Can you let us know what the backlog was at the end of the quarter? And roughly, what the sort of mix was within there, maybe between defense exports, the Department of Defense and other U.S. government agencies?

Rob, the backlog was around just south of $4 billion. It was in $3.8 billion range. The mix within that backlog, interestingly, has maintained fairly consistent levels of product backlog from where we started the year. And as you know, the mix within the backlog is a reflection of how we're progressing at different service contracts and how different task orders are being funded. We are seeing a shift in the timing and the frequency and the nature, we've been talking about that quite a bit recently, of how service contracts are being funded. So I think one of the key points is that the backlog, while it has come down, it’s relatively maintained its product content, which I think is an important point on a go-forward basis. A lot of our new non-DoD contracts, Air Traffic Management is a great example, don't have a major impact on our backlog statistics. And in some cases, some of our international customers, as you know, tend to be lumpy and will come in and out of backlog with not a tremendous amount of long-term visibility. So we will see these changing dynamics, if we look at the backlog metrics on a go-forward basis, as they shift, play through. But in totality, we have raised the view of our backlog to include both funded and unfunded orders. That backlog metric, which is also in the Form 10, has risen from about $10 billion last year to about $11.5 billion going into Q1. And that represents the aggregate opportunity set within the defense environment. So we are seeing good stability in the aggregate demand for different products and services.

And as a follow-up, Steve, on this defense margin issue, you said you expected a shift between product and services to go towards 40-60, and you're at 55% services during the quarter. But your margin was just over 9% here. So how are you going to get it up to 11%, given you expect to see more services in the future?

I was giving you a directional ratio difference over a long period of time. There's quite a bit of mix shifting and quarterly volatility in there. I think the way to think about it is think about the low end of the operating margin range that we gave you, and as the services mix starts becoming -- approximating half or slightly more of our portfolio, it would naturally take it down lower just because of dilutive effect. And that's going to be offset by the continued productivity and the non-DoD opportunities that we've talked about. So you're probably better off just to sort of take the number range we gave you, 11%, 11.5% range. And as additional color comes into this on a quarterly basis, we can give you the details. And with that, I think we've got time for one more question. And I know we have a number of analysts in the queue, so I apologize. But we'll take one more question.

And our final question comes from Gautam Khanna of Cowen and Company.

I just have a 2-part one. But on defense, it looks like we're probably set up for another continuing resolution to the budget in calendar Q4. Could you talk about how much visibility you have into that defense product shipment upturn in Q4? How much -- have you booked most of this already? Is it contingent on the fiscal '12 budget being passed by October 1? And then secondly, to address the earlier question on the FAA dynamic, can you remind us how big the FAA as a percentage is of your defense sales, and if you've seen any slowing heretofore?

Let me answer the first one on that in terms of backlog that we have. In terms of backlog for the fourth quarter, we've got about 85% of the revenues in backlog today. We did reduce -- the book to ship. We did take out -- we did reduce our forecast in the back half of the year a little bit per product to reflect some of the changing dynamics that we have there. So that's the answer to how much we have in the back half of the year.

Yes, I just wanted to add -- your question was how much additional visibility do we have. We obviously have very significant contacts throughout the Department of Defense as we normally transact our business, but there is a microcosm of variation going on right now that you're reading about with Speaker Boehner, Senator Reid, President Obama right now and that is actually -- that debate right now is actually that control point of what may happen. There are going be some changes in buying patterns. Clearly, what happens to the deficit will probably not happen in the very short term. We may get another continuing resolution. So all this adds up for a lot of uncertainty. What we have done is we have essentially, if you will, sort of thought through all that and revised our forecast a couple of times this year. We revised it down. We're just now revising it back up again. And coupled with the book to ship confidence that Denise just mentioned, we feel good about our ability to deliver at this point in time, but I think everyone just has to understand that there's going to be some unanticipated variation in this overall cycle. On the FAA, it's a couple of hundred million dollars a year right now. We have several billion dollars in long-term program backlog. But it's the number like that right now. The ADS-B, which is the initial installation of the GPS, ground-based GPS network, is well on track. We're at the halfway point or slightly beyond it. And everything is on schedule. We're under budget. We are executing on the SE2020, which is the advanced engineering contract with the FAA. And the next biggest opportunity, which we just recently received, would be the request for proposal on Datacom, which is going to go through a proposal phase for the next 1.5 years, won't probably be actually contracted till the end of 2012. But this is the next big opportunity to essentially be integrating full broadband data capability in with the GPS navigation, which will give us substantial advancement to air traffic productivity, and that's coming up, and hopefully, that will stay on track.

May I just ask one last one related to your defense business? You've talked in the past about the SideHat appliqué in the JTRS Program. We've had a number of JTRS tests in the last 2 months. Have the prospects improved for that program?

I think absolutely. This is a 10-year saga now in terms of JTRS, and what’s essentially happened in the last decade is the recognition that the full implementation of this advanced technology is just simply not affordable, coupled with the advancement in innovation with companies such as ITT that it put together some really attractive, adaptive modular technology, in some cases, using commercially available stuff with things we've talked about like SideHat, Rifleman, the Global Network On the Move within smartphone, these systems are now planned to be under test in real battlefield environments, which will for the first time really enable the U.S. government to be procuring alternative technology to the JTRS. And quite frankly, as we've said for several years, we're very well positioned to enjoy our fair share in that area. Let me just take a moment to conclude this. I want to say that we couldn't be more proud about the way this business is tracking. If you all go back and take a look at '07 and '08 baselines in this peer group and kind of look at what's happened with this company as well as all the others that you cover in the last 4 years from '08 to '11 EPS, you got to feel good. ITT is clearly at the top of that peer group, easily in the upper quartile. And even though we've seen a global economic crisis and defense -- defense budget concern, mix shift and everything else, this company continues to execute. And we feel good about where we are over a long period of time. We feel even better about this spin. This thing is on track. We have had significant contribution by our leaders, particularly Dr. Annita Nerses and Hota Suree [ph], who have given us just substantial commitment right from the top to keep this thing on schedule from day one. And when you think about the fact that we put this thing together to execute in a short period of time, the fact that we are actually on or arguably slightly ahead of that schedule, we couldn't be more proud about that, having achieved our goals of actually establishing 3 new very competitively financed and structured businesses that we think are going to be able to compete very effectively in each one of their markets. So you kind of add all that up, and we're going to close the second quarter call with a thanks to all of our employees and a thanks to all of you for your interest in this business and your patience as we proceed through this transaction. So with that, as the transaction proceeds, we will keep you informed. Thank you very much.

And ladies and gentlemen, that concludes the ITT Corporation Second Quarter 2011 Earnings Conference Call. We appreciate your time. And you may now disconnect.