Welcome to ITT's Third Quarter 2012 Earnings Conference Call. Starting the call today from ITT is Melissa Trombetta, Director of Investor Relations. She is joined by Denise Ramos, Chief Executive Officer and President; and Tom Scalera, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 12:00 p.m. Eastern Daylight Time. [Operator Instructions] It is now my pleasure to turn the floor over to Melissa Trombetta. You may begin your conference.

Thank you, Lin. Good morning, and welcome to ITT's Third Quarter 2012 Investor Review. Presenting this morning are ITT's Chief Executive Officer and President, Denise Ramos; and ITT's Chief Financial Officer, Tom Scalera. 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 make about future expectations constitute forward-looking statements under 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 10-K and other public SEC filings. So now let me turn it over to Denise.

Good morning, everyone. Let me start by saying that I appreciate you all joining us this morning. We in the Northeast know what many of you are dealing with in the aftermath of Hurricane Sandy, and we greatly appreciate you taking the time to be with us this morning. Our thoughts are with you and your families during these difficult times. So now turning to Slide 3. One year ago this week, we successfully executed 2 simultaneous spinoffs and launched a more nimble and industrially focused ITT. This morning, I'd like to take this opportunity to share with you how our new focus has helped to create tremendous value for all of our stakeholders. When I look back on all that we have accomplished in the last 12 months, one word comes to mind: impressive. And I'd like to take a moment to acknowledge the hardworking and dedicated team members all across ITT that united with a shared purpose to build a strong foundation for our future growth. I've traveled to nearly every location that ITT operates. I've met with dozens of customers and I've personally met hundreds of team members. And it is clear to me that we have a very strong culture of collaboration and customer focus. As a company, we are highly energized to work together to help our customers realize their goals. Our collective focus is tangible and I think it creates a unique competitive advantage. Now I'd like to provide some of the specific performance highlights over the past year that are all aligned with the 6 profitable growth drivers we identified a year ago. First, in emerging markets, which represents nearly 30% of our revenue. We have a tremendous operational foundation that we have utilized to drive targeted growth in key end markets and…

Thanks, Denise. Now let's turn to Slide 6 for a review of the third quarter financial results in greater detail. As Denise mentioned, we delivered phenomenal organic revenue growth of 10% that was driven by global demand for our chemical, mining and general industry pumps and continued automotive share gains. The Industrial Process segment grew an impressive 23% organically, delivering a fourth consecutive quarter of record shipments. In addition to strong North -- growth in North America, Industrial Process grew 18% in emerging markets, reflecting growth in oil and gas and mining. The strong third quarter top line growth also reflected continued market share gains in global automotive. Motion Technologies' organic revenue improved 11%, with growth in all major regions. This result greatly outpaced the market due to a number of recent share gain. Partially offsetting these areas of strength were share declines in a difficult global connector market and prior year comparisons for Control Technologies from a limited China rail program. In the quarter, organic orders were up 2%, consistent with Industrial Process' 2% increase. Motion Technologies' 6% order increase was partially offset by low-single-digit declines in Interconnect Solutions and Control Technologies. Q3 adjusted segment operating income of $69 million improved 10% due to increased pump and friction volumes, a favorable mix in Industrial Process and 300 basis points of net operating productivity. These increases were somewhat offset by volume declines at connectors, the negative impact of foreign exchange and recurring spin dis-synergy costs. For the quarter, our adjusted EPS of $0.44 reflected the strong operating income growth and favorable non-operating cost primarily related to lower interest and taxes. Our effective tax rate for the quarter was 29.5%, which was consistent with the Q2 year-to-date rate. The special items that were excluded from Q3 adjusted results are listed in…

Thank you, Tom. On October 15, we announced our intention to acquire Bornemann Pumps, a global leader in the manufacture and application of twin-screw pumps into the oil and gas markets. Our interest in Bornemann is based on a positive view of the long-term strength in the oil and gas market. As existing reserves peak, global demand for petroleum resources are driving production for more challenging reserves such as Canadian oil sands, shale gas and oil offshore and in remote regions. These reserves are transforming the market and driving the need for new, innovative production technologies. Bornemann has established itself as a global leader in these technologies and has evolved their pumps so that they can operate efficiently and reliably on products, from heavy crude to wet gas and everything in between. The combination of Bornemann with our Goulds technologies means that we can offer a broader and complementary portfolio of engineered products to our oil and gas customers. IP provides a global packaging and service footprint to support Bornemann's growth, while the alignment of our customer bases provides a number of synergy opportunities. As we announced on October 15, the expected purchase price is EUR 206 million, subject to typical adjustment. Bornemann has expected 2012 sales of EUR 115 million and has a diversified business and geographic mix, including 45% emerging market. In addition, 30% of their revenues are in the high-margin aftermarket, and the end markets they serve are generally aligned with those that we focus on, although with different but complementary product line. We have filed the German merger control notification and anticipate closing in the fourth quarter, contingent upon customer and closing conditions, including appropriate regulatory approval. So in summary, we are excited to be continuing to drive execution and operational focus in our business segments but also to demonstrate our commitment to strategic, balanced and disciplined capital deployment. This quarter is a perfect example of executing that playbook. So now let me turn it over to Lin to start the Q&A.

[Operator Instructions] Our first question is coming from Matt Summerville with KeyBanc.

A couple of questions. Denise, you mentioned in your prepared remarks that ICS is encountering operational issues. Is that incremental to what you've said on past calls? And then I guess, with the restructuring you're doing there, what kind of anticipated savings do you expect? And how much are you able to lower the break-even point in that business, which you are clearly approaching this quarter?

Let me give you a perspective on ICS. It was really about a year ago, when the spin occurred, that we recognized and we really studied our connectors business. And we determined that we were not really delivering the type of performance that, that business is really entitled to when you think of the strength of the Cannon brand and being in harsh-environment connectors. So we started looking of that, and then on top of that, you had some of these challenges that began to occur in the global macroeconomic environment. And so we knew that we had to accelerate the actions that we were going to take around our connectors business. So let me tell you some of the things that we did there: We've put in a new ops leader who has very strong connectors experience, and this ops leader is focused on sourcing activities and Lean initiatives, with a very strong focus on the cost structure within that business. And that's been demonstrated through the proactive restructuring that we've -- taken place in the second half of 2012. The other thing is we recognize that ICS needed to be more focused on delivering premier customer experience, as opposed to being more focused on product lines. So we've put in some new front-end leaders. We have reorganized the front end of this business to integrate engineering, sales and product management, and we've done that around key end markets that we see have very high-growth opportunities out into the future, one such as oil and gas, aero, rail. We also have performed a very detailed product line analysis to look at the profitability and we're assessing actions to improve along those lines. So this work has been continuing for a while now, actions are being implemented. I recognize it's going to take some time to see the full benefit of this, but the proactive restructuring that we've done to date is really going to help us as we get into 2013. And then all of these other actions and initiatives will then come into play as we progress on this journey with our connectors business. But Cannon, a great brand, synonymous with harsh-environment connectors, and it's a brand that we just need to refocus and realign some of our cost structure with. With that, Tom, did you want to comment on any of the numbers?

Yes. So Matt, we will have announced about $7.1 million of restructuring in connectors by the end of the year, this year. And the bulk of that will be in Q4 in Europe, and all these actions have been announced. We do want to reposition the European cost structure. We did take actions in North America in Q3 and, actually, some additional actions in China as well. Most of the benefits for those restructuring actions will be delivered in 2013. So we're going to see about a -- a little over a year of payback on those actions, but it's all about repositioning the operations that Denise articulated. So we've been working pretty hard at these actions. I think that the downturn in the market maybe was more pronounced sooner than we expected, and we did see it on a number of fronts, from handheld market, pressures with some customers. We saw some pressures with the China rail program. Our defense business also faced some problematic headwinds. And then Europe, in general, was a difficult marketplace for us. So those headwinds were certainly here, but we wanted to take very proactive steps to reduce our overall fixed cost structure and we've been doing that throughout the course of the year. We accelerated quite a bit into Q4.

So as Tom said, we were exposed maybe more so than some of our competitive set in Europe because we have a stronger presence there in the defense market and then with -- on the handheld side with one of our key customers. So we had some impact there relative to our competitors. We're not in the automotive space, which is seeing some nice growth.

And then on that $7.1 million, Tom, do you expect a one-to-one payback on that over the next 12 to 15 months or whatever?

Yes, that's about the right time frame, Matt.

Okay. And then my other question was around market share. It's clearly evident in motion and in Industrial Process that those businesses are benefiting from substantial share gains. As you sit here today and you're out in the marketplace competing, are you still finding a similar win rate to what you would have had 6, 12, 18 months ago if some of that stuff is now just hitting your P&L? And really, what I'm trying to get at is, if -- as we move into '13, is that share gain momentum still going to be evident?

We've been seeing some very nice growth, as you indicated, in our IP business, in our Motion Technologies business. And we think, in many of the end markets in IP, we're going to continue to gain share. When you think about our oil and gas initiative that we started about 5 or 6 years ago, we've been building share all through the past 5 to 6 years, and we're seeing that even in terms of the order growth that we saw in Q3 for IP where we had 18% order growth there. So where we play is -- it has been very critical to us in the oil and gas segment. We have a very strong business in North America. And because of what's been happening in North America with the strength in the upstream production, pipeline is getting built out, refineries changing the type of crude oil feedstock, which drives replacement pumps, we do expect to continue to gain some share as we go into 2013. And then the fact that we have Bornemann, which can expand our portfolio and the products, just gives us a lot of future opportunities to be able to create synergies across the portfolio. We feel good about that. We've been also making some nice strides on the chemical side. That's been our historic strength North America, and it's more on the petrochemical side that we're seeing some nice growth there. Motion Technologies, that has been historically a European business, and we made a very conscious strategic decision that we wanted to expand that business from Europe into North America and China. It is why we've been building a production facility and an R&D facility in Wuxi, China, this year that really will be up and running at the beginning of next year. At the same time that we've been doing that, we've been building our presence in North America, primarily with Ford. And as Ford has gone to more global platforms, that has give us -- that has given us more capability to expand our business with Ford. And that business has actually been growing 4x the market over the past 5 or 6 years. So we don't see that, that will change. We think that we will continue to gain market share with those 2 businesses. It was evident in the third quarter. It's been evident in the past. And with the capabilities that we have and the products that we have and the strengths that we have, we see that, that will continue for us into the future.

Your next question is coming from the line of Mike Halloran with Baird. Michael Halloran - Robert W. Baird & Co. Incorporated, Research Division: So on the IP margins, could you just talk a little bit about -- you saw a lot of strength this quarter. Talk a little bit about the mix of the underlying business as you look ahead to 3Q and then into next -- sorry, 4Q, and into next year and then also, what you're seeing kind of from core underlying trend on the OEM on the aftermarket side.

Yes, Mike, so we're -- the margin performance in Q3 in Industrial Process did reflect the nice mix of kind of medium-sized projects, if you will. We're still seeing the aggregate pressures on the large projects. There's been continued pricing pressure in that part of the end market. For us in Q3, we had a nice mix of aftermarket and kind of what I would call these medium-sized projects that had a very nice margin profile associated with those items. In Q4, the mix is going to shift back a little bit more to what we saw in the beginning of the year. We're going to have a little bit of a larger project mix. And we would expect margins to come back down in Q4 from the levels we're at in Q3, maybe more in line with what we've been seeing in the average of the first half of the year. The nature of this business, as you've all known, it's a lumpy business. And you have delivery schedules and projects will play through the system based on activities with the customer and our production capabilities. So we probably had a more favorable mix in Q3 than we initially planned. Some of that is going to move out of 4 into 3 and we would expect the mix to be less favorable going into Q4. As we move into 2013, I think we're going to see a lot of the same general conditions. We would expect large project pricing to remain competitive, and that's something that we're watching as we move forward. The real aftermarket drivers are going to be, for us, capturing our installed base that we've been really populating aggressively over the last 5 years when some of these major initiative kicked in. So we have to capture our own aftermarket, but we're really focusing on utilization rates and how intense will the aftermarket demand be going into 2013 relative to 2012. So we're cautious now, but we do end the Q3 with a very strong backlog, over $500 million, and that does give us some visibility into 2013. Michael Halloran - Robert W. Baird & Co. Incorporated, Research Division: Then, your competitors on that side have been talking about pushouts from an order standpoint, particularly orders of size and project of size. Are you guys seeing the same sort of the underlying dynamics in your industrial products business?

We are seeing that on the oil and gas side. So quote activity still remains strong, but we're seeing that it's taking longer for the orders to actually get placed. So we're watching it closely to see what happens. We believe it's because of so much uncertainty that's out there globally with what's happening in Europe, with what's happening in the U.S. and then with what's happening in China too. So we are seeing that, but we've not seen any cancellations. We've just seen that pushout in the orders.

Yes. And Mike, too, we're not on some of the megaprojects. We tend to have what we call medium- and large-size projects. Some of that additional pressure may be on the even larger-sized projects than what typically are these days. So we have seen an increase in activity partially because of the strength of our competitiveness, going back to Matt's question, in these industries. And we do have a broader range of technologies and end markets that we serve today that is giving us more opportunity to quote on jobs that maybe a couple of years ago we wouldn't have been a part of. So all those factors are giving us some additional indicators, but we expect the conditions to, as Denise mentioned, still reflect some delays and some caution on the side of our customers. Michael Halloran - Robert W. Baird & Co. Incorporated, Research Division: Makes sense. And then on the connectors side of things, obviously, the harsh-environment, connectors are the main focus there. But if you look at the remaining pieces in the portfolio, maybe you could just talk about the quality of the products there and the fit with the broader program that you guys are trying to push forward and if you feel like there's any steps from a product rationalization standpoint, as you look ahead here.

We are -- as I indicated, we are doing -- I mean, we have done a very detailed product line analysis, looking at profitability across our product lines. We're looking at profitability not only across product lines, but across end markets. And what we've noticed is -- with our connectors business is we've tended to spread ourselves too broadly. And what needs to happen in that business is we need to focus. So we need to focus on product lines. We need to focus on end markets. And that's the work that's being done right now. We're just trying to be all things to all people, and we're going to refocus and really grow in those areas where we've got our really strong capabilities, the strong technology that we've got, and really focus our efforts in those areas and build the portfolio along those lines.

Your next question comes from the line of Jim Krapfel with Morningstar.

Have you been able to leverage your European relationships with Ford into other platforms such as GM and Chrysler?

We certainly work with GM, Chrysler and Ford in many different ways on a global basis. So the relationship with Fiat is giving us additional opportunities to have a dialogue with Chrysler. And we do work with GM in both Europe and in Asia. So similar to the Ford dynamic, we did start with our Ford relationship in Europe. And we leverage a lot of our competitive strengths to really go after opportunities outside of Europe, including North America and China, as we've talked about. And what's interesting about some of these platforms is that they are global platforms. So there are opportunities for us with, we think, most major OEMs to go out and compete for global platforms based on the competitive advantages that we have and strengths that we have in that industry. So we see opportunities, we're working on those. But I think it's something we'll be talking about down the road.

Okay. And as we enter 2013, do you think continued market share gains will continue to be able to offset a lower level of global auto build?

That's part of the equation, Jim, for sure. It's certainly helped us this year. We're taking share even in Europe right now, and these are on existing platforms. We're able to kind of move in and displace some of our competition on existing platforms. So we are doing very well from a share perspective in a very difficult European market. Having said that, we would expect first half production rates to be down, like many others are projecting, so that's going to put some aggregate pressures on. Hard to really get a sense for how that will shake out for all of 2013, but as far as our competitive positioning, I think we feel very strong going into a difficult market, just like we experienced in 2012.

Your next question comes from the line of Ajay Kejriwal with FBR Capital Markets. Ajay Kejriwal - FBR Capital Markets & Co., Research Division: So on Bornemann, could you maybe talk a little bit about the margin profile? And then to the extent you're acquiring a backlog of orders, what's kind of baked in there? Any sense there would be helpful.

Well, let me just again highlight some of the nice things about Bornemann. With Bornemann, we have purchased some very high-quality assets. We're very excited about Bornemann and their technology that they bring to ITT. It is disruptive technology. It goes into the high-growth unconventional oil and gas market and it has a nice profitable aftermarket associated with it. And so we're very excited about what it brings to our portfolio. And the synergies that we see are going to be very, very nice because we're going to leverage IP scale with our global aftermarket footprint. We're going to leverage our sales channel in the U.S. where Bornemann really has no significant presence today. And we're going to be able to leverage our international assembly locations so that we can increase local content and bring Bornemann into those areas. And then we've got some nice strategic global accounts and we'll be able to leverage Bornemann into those strategic accounts. On the other side, Bornemann has some nice customer relationships that we're going to be able to utilize to then take our Goulds Pumps into. So we're really excited about that and what it can bring to this portfolio and all the new avenues it really opens up to us. It's a very nice strategic play for us.

Yes. And just to touch on the margin profile. Given the nature of what Bornemann does and how complementary their capabilities are to our Goulds Pumps business, we do see a similar EBITDA profile to what we have in our existing business. So that gives us good foundation and some opportunities for us to drive the synergies that Denise referenced, all subject to closing approval and the typical regulatory activities. But we do feel good about the strength of that business. And as it relates to backlog, Ajay, it is a very solid backlog that we see building up within the Bornemann profile. We think they're well positioned. Their technology, as Denise mentioned, is disruptive but it's been gaining a lot of market share over the last several years. And we see strength in the backlog and we've obviously been very focused in our due diligence work to make sure we get in and understand the profitability of that backlog. Ajay Kejriwal - FBR Capital Markets & Co., Research Division: Got it, so similar EBITDA margins. And then any comments on the D&A? I mean, would the margins post-D&A be accretive to a segment or neutral, any sense there?

The operating income margins, when you -- especially when you put the purchase accounting adjustments on top, would be dilutive to our operating income margins. Just we have to go through the valuation exercise to see to what extent. But from a cash perspective, I think their EBITDA margin would start in line with our margin, and then we would have the opportunities to grow from there. So we have to go through the purchase accounting exercise, but it would put a little bit of margin pressure out of the gate. Where we're going to really focus, as Denise mentioned, is on the higher-value capture of their aftermarket activities. And that's something that we can really get working on quickly because we have the global capabilities to really capture a higher percent of their aftermarket profitability than maybe is currently taking place today. So those will give us some additional upsides. Overall, from an EPS perspective, just lastly, we do expect the acquisition to be mildly accretive in 2013 when you take out the onetime purchase accounting hits in the first year. Ajay Kejriwal - FBR Capital Markets & Co., Research Division: Good. And then maybe a couple detailed questions. So that $1.5 million in deal-related costs that you announced 3Q, are they related to Bornemann? I mean, Bornemann was announced after the close of the quarter, right?

Right. Those are acquisition due diligence costs that we incurred to go do the process of the acquisition.

It was associated with all the due diligence that we did associated with Bornemann.

And that's something we don't typically put in our guidance. If we have a transaction that does not come to fruition, we do take those cost through our results, but we want to keep Bornemann isolated and the financial impacts it has because it was not part of our initial guidance for the year. Ajay Kejriwal - FBR Capital Markets & Co., Research Division: Got it. And then you called out a restructuring, you gave those details, year-to-date and what you expect in 4Q. Could you give us the similar numbers for repositioning and transformation costs year-to-date and what you expect in 4Q, please?

Yes. So the repositioning numbers in the quarter and the transformation costs, so those are really 2 categories. Transformation costs are very directly tied to the spin and kind of a process of, if you will, moving Exelis and Xylem into their own standalone financial results. Those numbers, as you would expect, will come down and just continue to come down in -- as the year has progressed. So those costs in the quarter on a pretax basis were about $3 million. And that run rate is going to start to ramp down. We would expect for really the full year -- if you put transformation and repositioning costs together on an after-tax basis, you're probably looking at about another $9 million in Q4. The repositioning costs are more costs that we're incurring to stand-alone our individual systems and support networks and activities after we separate from service agreements we have with the other 2 companies that have been spun off. So fairly standard activities that are all directly or very closely related to the spin process in getting us fully established. But by 2013, we would expect transformation costs to significantly ramp down. We'd have a little bit more repositioning work, and all that is actually laid out very nicely in the 10-Q which will be filed later today. Ajay Kejriwal - FBR Capital Markets & Co., Research Division: Right. And maybe just a philosophical question here, Denise. So these repositioning costs, this is coming -- you laid it out in your Q last quarter. It sounds like these continue into 2014. So I guess the question is, if you have visibility into 2014 in these costs, why would these be onetime? Why not pay as you go?

Ajay, these are very discrete events. So we have agreements based on the transition service agreements with Exelis and Xylem for certain services that we provide to them or they provide to us. So this is a onetime phenomenon where we have to stand-up systems and payroll and some ledger activity that are currently services that are being provided to us. This is not part of our ongoing run rate as a corporation. It's a very unusual series of activities that happen for all companies coming out of a spin where you have to have all of your systems independent from one another. And there's a 2-year time frame that was articulated at the date of spin for all of these transitions to take place. So we're very -- we're following that time line. And that's why we think it's going to take us 2 years to get through this. By the end of 2013, though, Ajay, most of these costs, both repositioning and transition costs -- transformation costs, will be behind us.

And your final question comes from the line of John Inch with Deutsche Bank.

I want to ask about the connector restructuring that's going on. Are you guys taking down capacity? And the angle of my question is that these industries are obviously cyclical and so maybe we can't really forecast the cyclical timing of the upturn. But it's likely to happen, and the question is, are you taking down capacity such that, when demand begins to ramp back up possibly next year, you're going to have to sort of spend on this? I mean, how are you thinking about this? Or is this restructuring really a re-footprinting out of Europe and higher-cost locations into lower-cost locations?

So right now, what we're looking at is we're just optimizing the current facilities that we've gotten, recognizing the lower volume levels that we have. As we go through this process of refocusing the portfolio and looking at that, we'll decide if we need to do things more than that. But for right now, we're just looking at the revenue declines and we're saying, "Okay, if this is where the business is right now, where should we really be effectively having our capacity and our footprint?" recognizing that there's a lot of Lean activities that are taking place. So even with the capacity we have today, we believe that we can have -- we can Lean it out and have more capability within each one of these factories than we've had to date. So it's -- right now, it's just really looking at the facilities and not reducing the capacity, but just making it leaner and around revenue numbers that we see today.

But Denise, in a scenario where demand might unforeseen-ly ramp 10%, are you still able to somehow flexibly adjust for that? Or is that going to cost you on the way back up?

No, I mean, we're able to flexibly adjust to that because there is a lot of this work that's taking place around Lean, and the facilities are already in place to accommodate that.

Okay, so an attempt like the re-footprinting is maybe a stage 2 or next step, is that fair to say, beyond sort of a short-term economic environment?

That's correct, John. That's correct.

Okay. Tom, if you can -- and I apologize if you've sort of answered this question indirectly, but can you just tally up, what is your expectation of total restructuring cost to be incurred this year? And what sort of a tailwind does that provide you in 2013 from an earnings standpoint?

Sure, John. Yes, we're -- we've got about $4.6 million in Q3. We're going to do another about $6 million in Q4. If you add it all up for the year, it's about a little over $12 million of restructuring. And the payback...

So for the whole company?

For the whole company, yes. That's all in. And we did some work in Motion Technologies, again about getting out our -- some of our European cost, fixed cost structures. And some of this repositioning or restructuring activity, I would say, is a byproduct of just the increased focus that we have. So with new leadership and a new focus, we have been kind of going out and looking at some of these costs. So we did some European cost restructuring at our Motion Technologies business. We did some additional restructuring in our Control Technologies business early in the year, and you saw that they got really strong margins, 20% in Q3 at our Control Technologies business. So we're proactively getting at a number of different segments this year. When you tally it all up, it's $12 million of expense. And the payback for that is about a little over a year in total, about $1.2 million. So you'll see the bulk of the savings really play through in 2013, with just a little bit coming in Q4 from the earlier actions we've already taken.

And just how much of the $12 million would you say is capacity-related given the current sluggish macro environment, which I realize is disproportionally not as negatively affecting you versus, say, productivity types of projects, say, in terms of reducing rework, et cetera. Or is that still on the com?

It's really about productivity and reducing our overall fixed cost structures. So we have -- we've been growing our Motion Technologies business, our Industrial Process business at very strong rates. So at the -- capacity is not an area of focus, and really, either one of those businesses have been adding it in line with our growth, quite frankly. But we're really getting at improved efficiencies, optimizing our work and make sure that we really get out the fixed cost structures behind these businesses so that we could -- we can be even more competitive when volumes do recover.

So this is an important point because Lean transformation and the journey that we've embarked upon here is something that we were -- that we've initiated regardless of what was happening from a macroeconomic perspective. Now with the macroeconomic perspective, that makes it even more imperative that you look at these activities and decide what you're going to do. But this is part of a process that we've put underway to drive our facilities to become more lean and to become more productive over the next few years out here. So in Motion Technologies and in IP, both of those businesses, with the high growth rates that they've seen over the past number of years, they've been at capacity which is why we've been building out the Wuxi facility in China and why, for IP, we've been -- we're putting into place a new South Korea facility and why we're doing a lot of work at their Seneca Falls facility. So those businesses, with the high growth that they've had, all their work has really been structured around just making sure that they're more cost competitive and they're more efficient as we go out into the future. Connectors is a little bit of a different story because we had all that work to do, anyway, with connectors, and then on top of that, you had a deterioration, a significant deterioration in the top line. So in that situation, you have a little bit of both occurring..

So that makes sense. Your Western European organic performance, up 1%, substantially better than other companies. Are you anticipating, based on trend and your mix, that, that will go negative in the fourth quarter? And the other sort of part of that question is, do you feel that -- again based on sort of the dynamic of short-cycle connector mix and so forth, that these markets in Western Europe, fourth quarter represents some sort of a bottom? I'm not trying to suggest you can call when things turn but that you feel pretty good about sort of the sequential run rate from, say, fourth quarter or third quarter or whatever.

Yes, hard to say. We have really 2 businesses in Europe. We have our Motion Technologies business and we've got our connectors business. It's hard to say what's going to happen with the connectors business with the uncertainty that's there in Europe. I would expect that it's not going to increase as we get into next year with -- in Western Europe. In terms of Motion Technologies, on a business that we have there, it's -- we're now seeing not only declines in Southern Europe but we're seeing some challenges in Germany too. So I think it's really going to depend on how significantly that continues to decline. And we know that the first half is going to be a challenge still for us from an automotive perspective. And then to the extent that we can try to offset that through share gains, we will do that, I'm just not sure how that will offset at the end of the day.

Yes. And just to follow up on Q4, too, John. So connectors in Europe in Q4 is facing probably increased headwinds from what they had in Q3, which is reasonably okay on the top line in Europe for our connectors business, but I would expect to see increased pressure. A lot of the closures and slowing activities in Q4 will probably impact our connectors business fairly quickly in Europe in Q4. And Motion Technologies, we're watching. We feel good about what we have in the order pipeline but a lot of closures and a lot of activities that are still playing through the European market. So we're kind of cautiously watching those pressures but we feel good about our competitive positioning at Motion Technologies, not only in Europe but on a global basis.

Well, I guess there's also the risk of extended plant shutdowns, which could affect that business as well. Do you have any color around that? Is that pretty much what you're planning for? Or is it going to be a bit of a wait-and-see?

We have factored some of that into our numbers, particularly for this year. The -- when you hear about factory shutdown in Europe, some of that is related to just optimizing the footprint and then some of it is also related to lower production volumes. So it's those lower production volumes that we're monitoring, but what we know today, we factor that into our fourth quarter.

And I would say too, John, that dynamic is putting some margin pressure on Q4 because some of our customers are ordering shorter batches and we're doing more line changes than we normally do on our factories. So it's creating some additional inefficiencies as our customers start to kind of tighten up a little bit with their order habits.

And just lastly, Tom, what's happened to price in connectors? And do you see that sort of stabilizing?

It's stable. It's been stable all year. It was stable in the fourth -- in the third quarter. We would think, stable to slightly up. So this is not a price issue. We're not trading down price to increase our volumes. We're seeing, actually, fairly stable pricing. I think, for that market, it's about technology and making sure that you're appropriately positioned, as Denise articulated, with your customers and what their needs are. But it hasn't been a real pricing issue for us. It's been about competitiveness and focus.

Thank you, John. So let me just summarize what we said today. We are delighted with the progress that we've made in just one year, post spin. And we are laser-focused on continuing to deliver on the 6 profitable growth drivers that we've articulated. In emerging markets, we're going to deliver 10% growth in 2012 alone, and that is on a strong base of almost 30% of our revenue. With our aftermarket, we've had strong growth in the past year and we continue to develop solutions to target this profitable revenue stream. Technology and innovation, highly engineered solutions are the core of our business and we continue to invest above the peer average to ensure our growth for the long term. With premier customer experience, we focus on understanding our customer needs everyday so that we can provide the right product at the right time. With operational excellence, we have achieved over $100 million of gross productivity savings and we have proactively initiated restructuring actions, which position us well to be nimble during this unpredictable macro environment. And we have demonstrated strategic, disciplined and balanced capital deployment through our investments in CapEx, our acquisition activity and our returns to shareholders with buybacks and a competitive dividend. So in closing: I couldn't be more pleased with our progression since spin and this exceptional third quarter performance. And we look forward to talking to you again next quarter. Thank you.

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time. And have a wonderful day.