Welcome, and thank you all for holding. [Operator Instructions] Also, today's call is being recorded. If you have any objections, please disconnect at this time. I will now turn the call over to Ms. Martie Zakas. Ma'am, you may begin.

Thank you. Good morning, everyone. Welcome to Mueller Water Products 2014 Third Quarter Conference Call. We issued our press release reporting results of operations for the quarter ended June 30, 2014, yesterday afternoon. A copy of it is available on our website, muellerwaterproducts.com. Mueller Water Products had 159.7 million shares of common stock outstanding at June 30, 2014. Discussing the third quarter's results this morning are Greg Hyland, our Chairman, President and CEO; and Evan Hart, our CFO. This morning's call is being recorded and webcast live on the Internet. We have also posted slides on our website to help illustrate the quarter's results, as well as to address forward-looking statements and our non-GAAP disclosure requirements. At this time, please refer to Slide 2. This slide identifies certain non-GAAP financial measures referenced in our press release, on our slides and on this call, and discloses the reasons why we believe that these measures provide useful information to investors. Reconciliations between GAAP and non-GAAP financial measures are included in the supplemental information within our press release and on our website. Slide 3 addresses our forward-looking statements made on this call. This slide includes cautionary information identifying important factors that could cause actual results to differ materially from those included in forward-looking statements, as well as specific examples of forward-looking statements. Please review Slides 2 and 3 in their entirety. During this call, all references to a specific year or quarter, unless specified otherwise, refer to our fiscal year. Our fiscal year ends on September 30. All operating results discussed in these prepared remarks are from continuing operations, unless specified otherwise. A replay of this morning's call will be available for 30 days after the call at 1 (866) 418-8386. The archived webcast and corresponding slides will be available for at least 90 days in the Investor Relations section of our website. In addition, we will furnish a copy of our prepared remarks on Form 8-K later this morning. After the prepared remarks, we will open the call to questions. I will now turn the call over to Greg.

Thanks, Martie. Thank you for joining us today as we discuss our results for the 2014 third quarter. I'll begin with a brief overview of the quarter, followed by Evan's detailed financial report, which covers key drivers affecting our businesses. I will then provide additional comments on the quarter's results and developments in our end markets, as well as our outlook for the 2014 fourth quarter. We are pleased with our improved overall performance in the third quarter with year-over-year growth in net sales, net income per diluted share and free cash flow, as well as a 27% increase in operating income. Mueller Co.'s net sales increased 7% in the quarter, driven primarily by domestic shipments of valves, hydrants and brass products, which were up 28%. The increase in shipments was the primary driver of Mueller Co.'s adjusted operating income growth of 39.5% in the quarter to its highest adjusted operating income level since the second quarter of 2007. Anvil's net sales increased 4% in the quarter to the highest level since the fourth quarter of 2009. Anvil's adjusted operating income declined in the quarter, primarily attributable to the approximately $3.5 million third quarter impact of operational inefficiencies that occurred during the second quarter at Anvil's largest manufacturing facility. These inefficiencies have been resolved as we discussed on our second conference call. Excluding these inefficiencies, Anvil's adjusted operating margin in this quarter would have been roughly equivalent to that of last year. With our improved operating performance and free cash flow generation, our net debt leverage declined to 2.6x at the end of the third quarter. We also recently announced the redemption of $55 million principal amount of our senior subordinated notes, which will reduce our annual interest expense by about $4 million. We continue to believe consolidated results for the 2014 fourth quarter will improve year-over-year, primarily due to expected ongoing growth in our key end markets and the benefits of stronger operating leverage, particularly at Mueller Co. With that, I'll turn the call over to Evan for a detailed discussion of our financial results for the quarter.

Thanks, Greg, and good morning, everyone. I'll first review our third quarter consolidated financial results and then discuss segment performance. Net sales for the 2014 third quarter of $318.5 million increased $19.1 million or 6.4% from the 2013 third quarter net sales of $299.4 million, due primarily to higher shipment volumes at both Mueller Co. and Anvil. Gross profit increased 8.1% to $97.3 million for the 2014 third quarter, compared to $90 million for the 2013 third quarter. This improvement was driven primarily by higher shipment volumes and higher sales prices. Gross profit margin of 30.5% in the 2014 third quarter increased 40 basis points from 31 -- 30.1% in the 2013 third quarter. Selling, general and administrative expenses, as a percentage of net sales, improved to 17.4% in the 2014 third quarter as compared with 19% in the 2013 third quarter. Selling, general and administrative expenses for the 2014 third quarter were $55.3 million, down from $56.9 million in the 2013 third quarter. Adjusted operating income for the 2014 third quarter increased 26.9% to $42 million as compared with $33.1 million for the 2013 third quarter. This increase was due primarily to higher shipment volumes and higher sales prices. Adjusted operating margin also improved 210 basis points to 13.2%. Higher shipment volumes were the biggest contributor to this improvement. Adjusted EBITDA for the 2014 third quarter increased 17.4% to $56 million as compared with $47.7 million for the 2013 third quarter. Adjusted EBITDA for the trailing 12 months was $174.8 million, the highest in more than 5 years. Interest expense net for the 2014 third quarter declined $200,000 to $12.5 million as compared with $12.7 million in the 2013 third quarter. During the 2014 third quarter, income tax expense was $10.8 million on income before income taxes of $29.3…

Thanks, Evan. I'll now elaborate on our 2014 third quarter results and end markets, and provide an outlook for the fourth quarter. I'll begin with Mueller Co. Mueller Co. had a solid quarter with overall net sales up 7.4% year-over-year. It was Mueller Co.'s best performance from the standpoint of adjusted operating income, adjusted operating margin and adjusted EBITDA margin combined since 2008. At base Mueller Co., which excludes our newer technology products and services, net sales grew approximately 9%. To really understand the drivers of base Mueller Co. net sales growth, we have to look at what happened in several of our addressed markets. Strong growth in municipal spending and residential construction were the key drivers of the 28% year-over-year increase in net sales of our domestic iron gate valves, hydrants and brass products. Certainly, a portion of this growth was related to the difference in timing of our price increase this year on valves and hydrants compared to the timing of our price increase last year, as well as the sequence backlog we had coming into the quarter. We believe that looking at year-over-year domestic shipments for valves, hydrants and brass products for the second and third quarters adjusts for the difference in timing of the price increase and gives us a better idea of what's happening in our end markets. Shipments of those products in the second and third quarters were up a strong 18% year-over-year. We believe the end-market growth came from both the municipal and residential markets with roughly 2/3 of this growth coming from municipal spending. We experienced 13% sales growth in Canada, excluding the negative impact of unfavorable currency exchange rates. We expected a decline in our shipments to the water treatment market this quarter and pointed it out on our last conference…

[Operator Instructions] Our first question today comes from Mike Wood.

Mike Wood at Macquarie. Just in Anvil, excluding the results of manufacturing inefficiency that you called out, there still wasn't leverage on the volume growth. Was this a mix issue? And can you just talk through if oil & gas industrial markets have different margin profile compared to commercial?

Mike, they're really not that significantly different, it can vary project by project by project. But again, if we look at our volume and net increase volume on Anvil, we think that converted at about a 32% rate. So that's pretty much in the range that we would expect.

Got it, okay. And also on the bond redemption, I'm just curious how you came up with the $55 million on the 7 3/8% and why not more? And is there the ability to call and refi the remainder at more attractive rates?

Yes, Evan Hart to address that.

No, Mike, as you know, we have a $65 million restricted payment basket available to redeem the subordinated notes. We chose $55 million just to have a little remaining under the RP basket. That was really the only decision just to not fully utilize the RP basket before the senior notes mature and are callable at September 1, 2015. And yes, we always evaluate our cash position and the capital structure and assess any opportunities for refinancing.

Our next question comes from Kevin Maczka. Kevin R. Maczka - BB&T Capital Markets, Research Division: BB&T Capital Markets. So first question, it sounds like volume was the biggest driver of the strong margin performance in Mueller Co. I'm wondering if you can address capacity utilization both there and in Anvil. Where are we now?

Yes, Mike, we -- when we look at our... Kevin, yes, when we look at our capacity utilization, we estimate probably in this third quarter at our valve plant, we were up at 75%, maybe even close to 80% capacity utilization, albeit that's on 2 shifts. We were a little less capacity utilization at our hydro plant, probably a little more in the 60% to 65% range. So overall, we're going to stay at -- we think at Mueller, probably we were still under 70% in total, and Anvil, slightly under 75%, we think probably between 65% and 70%. So we still have a lot of -- long way -- a lot of capacity left. And again, as I said that -- on some of these plants, it was only at a 2-shift basis, so we certainly have the availability to add a third shift if needed. Kevin R. Maczka - BB&T Capital Markets, Research Division: Got it. And then, am I correct in that you're saying volume was the bigger driver than the price increase? And do you expect more benefit from the price increase in Q4 and into the new year?

When we look at Mueller Co. on the 450 basis points margin improvement, about 100 of those basis points improvement came from pricing. And the rest of it came from volume and pretty importantly, mix. Because as we said that we saw very nice growth in domestic valves and hydrants. And of course, as you know, they're our highest margin products. And in this quarter -- that when we moved a year ago, the markets -- and our distributors started bringing in no-lead brass for our brass products. We anniversary-ed that this quarter, so we may have seen a little benefit in that pricing, but we won't expect that to see kind of benefit going forward. So in total, of our 450-basis points improvement, we think about 350 basis points were related both to volume and mix, and then about 100 basis points to price. Kevin R. Maczka - BB&T Capital Markets, Research Division: Got it. And just finally from me, Greg, can you just say a little bit more about the muni markets and the resi markets? I think you said the distributor inventory was low, the orders suggest optimism there. But of course, there's been some slowing in the land development. I guess, have you seen that in your business yet?

Very difficult for us, Kevin, to differentiate and find that. We saw nice growth. We clearly believe that a greater percentage of our growth, as we've stated, is coming from municipal spending. We've seen some pretty strong pockets of, I think, repair replacement work that probably had been pent-up demand and delayed. I will note that if you -- when we look at our domestic sales regions, our shipment growth in valves and hydrants and brass products were anywhere from 20% to 40%. And the region that only grew 20%, the Western region, actually, probably 1 year ago was seeing more growth than housing. So if anything, we maybe seeing regionally a little bit of an impact in the west, but I think right now, it's difficult for us to be able to say we're seeing a significant dropoff from residential construction. And we're pretty convinced we're seeing nice growth coming from municipal spending.

Our next question comes from Seth Weber.

It's RBC. So on the systems and Echologics business, I just want to make sure my math is correct. If revenue is about flat for the third quarter, and fourth quarter you're saying up about 20%, that puts the full year sort of high single digits.

Yes, that's right.

Which I think, prior -- previously, you had talked about kind of 20 -- a little under 20%. So did something get pushed out or is there something going on there?

Yes, I'll tell you, Seth. So probably the biggest impact that we're seeing certainly in our Mueller Systems is a slowdown in order intake from our largest customers. When we look at this quarter, orders and shipments were below our expectations there. We were expecting a significant pickup in orders as we entered the construction season. We didn't see the increase that we expected, primarily, that we believe our customer there is reducing its meter inventory this year impacted our third quarter, and it caused us to also lower our fourth quarter expectations. So when we look for the year, we expect probably our orders and shipments will be down anywhere from 25% to 30% from what we saw last year from our largest water meter customer. Meters are not going to any other meter manufacturer. They shared with us that they're looking to bring down some inventory this year, which leads us to believe that we'll see the pickup next year. But if you look at the biggest impact to our growth rate in the meter side has been, I would say, the reduced orders that we've seen from our largest meter customer. In addition, as we said in our prepared remark, our quotation activity is at a nice level. Our backlog is actually up $5 million at the end of the third quarter at Mueller Systems year-over-year. But we are seeing a longer decision time relative to AMI systems. But by far, the biggest impact has been, I think, the 25% to 30% reduction on a year-over-year basis in meter activity from our largest customer.

Okay, that's very helpful. Evan, can you just -- any additional help on the profitability of this System's Echologics business? You said it was about $1.5 million delta year-over-year but was it -- can you talk about whether it changed sequentially at all? It looks like you may have -- the profitability may have come down a little bit sequentially? Is that the right way to think about it? Or that's not correct?

Yes, that's certainly improvement year-over-year, about $1.5 million attributable to lower cost and the favorable product mix that we saw during the quarter. And then if you look sequentially -- if you look at sequentially, I would say about $1 million higher, on a sequential basis.

Okay, that's great. Okay. Is that where most of the SG&A -- so your SG&A was really good. I mean, it is better than we were expecting. Is that where you're seeing the reductions come out of? Or maybe can you just talk about SG&A going forward? How we should be thinking about that because it was -- it did come down year-over-year and it's frankly better than what we are looking for.

Yes, total SG&A moved from $56.9 million down to $55.3 million, about 19% of net sales last year to 17.4% of net sales this year. Certainly, there were some benefit coming from Mueller Systems as well. But if you look at -- on the overall, in the quarter, we saw lower professional fees and some lower employee-related expenses. Looking at year-to-date '13 versus '14, percentage of sales 19.2% last year down to 18.8% this year, slightly up. And that slight increase was due primarily to costs that were previously reported as discontinued operations for the full year. But on the whole, we're seeing lower professional fees and lower employee-related expenses.

Our next question comes from Ryan Connors.

It's Janney Montgomery. I had a question just kind of a big picture question for you in regards to kind of the margin profile of Mueller Co. I mean, here we are back near the 20% level on an operating margin basis. I think -- I remember a couple of years ago, Greg, you had n saying that maybe -- it might be -- that business might be hard pressed to get back above that 20% level as we move into the next cycle, and here we are, almost there. So can you just kind of give us your updated thinking on what the good kind of normalized mid-cycle margin level to think about for that business? Looking out a couple of years, are we kind of there? And do you think there's more upside? What are your thoughts there?

Yes, thanks for the question. If I recall, we were probably saying about 18 months ago, 2 years ago, we thought we could get it around 20% when we saw housing starts getting to 1.1 million or 1.2 million. You're right, we're getting there a little quicker. I think what we saw -- certainly, what we saw this quarter was such a very strong mix from valves and hydrants. The growth -- we said that the shipments grew 28% on a year-over-year basis, and those products are our higher-margin products. But I think that -- I think we would still feel comfortable in saying that the 20% margins or EBIT margins, ROI margins, were 25% to 26% EBITDA margins when we get to the 1.1 million or 1.2 million. But I do think that we are seeing the benefits of our cost-reduction activities that we've implemented over the last several years, both from what we've done in the capacity side, as well as what we're doing with lean. And I think it's possible if we continue to see a mix of valves and the hydrants as a percent of our total, like we did the last quarter, that we can be close to that -- the 20%. And we do think that we will continue to see when we look out in 2015, further improvement in our systems and Echologics. So I'm comfortable in saying that when we see 1.2 million, 1.2 million housing starts we think that 20% is sustainable. But clearly, I think that, from any given quarter with -- based on mix, we can hit the 20% where we are today given our less than 70% debt capacity utilization.

Great. Well, that covers the demand side nicely, Greg. I wonder if you could comment kind of on the supply side industry-wise, I mean, has -- what's happened in the last few years in terms of capacity? A lot of this industry is privately held so it's tough for us to keep track of capacity curtailment, and things like that. How is it capacity industry wide structured today relative to the prior cycle to your knowledge?

Yes, I think it's pretty similar. We're unaware of any significant reductions in capacity. I think as we went through this downturn, the valves and hydrants continue to remain profitable and generate positive cash flow. Certainly, our history, we know that the industry did take out capacity on the duck liner [ph] Pipe manufacturing side. But I would say on the valves and hydrants side, it is probably stayed -- it remained pretty steady throughout this period.

Great. And then just a follow-up for you, Evan, on the balance sheet side. Are there any additional near-term opportunities to take out additional debt, in particular the 8 3/4% notes callables? Or are you restricted on what you can do there in the near term?

Well, the senior notes, the 8 3/4% notes, we can call those in September of 2015 at 104.375. With respect to the subordinated notes, we do have $10 million remaining under our restricted payment basket. As I mentioned before, we utilized $55 million of the $65 million RP basket just to allow us to have a bit of flexibility throughout the maturity of the senior notes, and the senior notes govern that subordinated note takeout. So that's the opportunity that we have currently.

Jerry Revich, your line is open.

It's Goldman Sachs. Can we just talk about the margin outlook for Mueller Co. for the fourth quarter as we think about the tailwinds of volumes that are going be better than 3Q if you hit your sales guidance? And then we should a greater improvement in Mueller Systems in the fourth quarter than in the third quarter, if the business is going to be profitable for the full year. So just circling back the guidance, I guess, why wouldn't the year-over-year margin improvement in Mueller Co. be as good or better in the fourth quarter compared to what we saw in the third quarter?

Yes, Jerry, when we look at the -- I'd say right now that we still have some questions about our overall volume at Mueller Systems. So right now, we said that we expect Mueller Systems to be certainly be breakeven for the full year. But we still have some orders that we're not sure if they will book and ship in time. So certainly, I think we took a little bit of a discount there. What we saw in the third quarter from Mueller is probably higher overhead absorption than what we would expect to see in the fourth quarter. And that, again, comes from the timing of the orders that we got ahead of the price increase that came in, in mid-February. We did -- we've put out a lot of hours in manufacturing those in March, so we got some of the benefit of those increased orders in the end of the second quarter, but we also had more of that benefit coming into the third quarter. So probably, the only real difference when we think of it year-over-year was -- I mean -- sorry, sequentially in the quarter, is the -- is we will probably got a benefit of more overhead absorption in the third quarter than what we expect to see in the fourth quarter. And also, as I referenced a little earlier, relative to the inventorying the no-lead brass -- anniversary-ing the no-lead brass price increase that we saw a little bit of benefit of that on a year-over-year basis in the third quarter, we won't see any of that benefit in the fourth quarter.

Okay, that's very clear. And Greg, on the pricing point with that leadless product benefit, in total pricing was up 1%, you mentioned. As we think about fourth quarter, what's the pricing impact that we expect? So you're not going to get the leadless but you're going to get a full quarter of better pricing. Can you just calibrate on then?

Yes, we do expect to see a contribution to overall margin improvement from pricing and probably, slightly less than the 100 basis points that we saw in the third quarter.

Okay. And then, can you talk about the cadence of orders in Mueller Co. over the course of the quarter? You mentioned dealers took down their inventories. Did that catch you by surprise? And if you're willing to touch on order trends in July, that'll be helpful.

Yes, it was -- we saw nice orders in -- nice share again in orders in April. May and June, we still saw orders up year-over-year, but that rate of increase declined. And what we believe happened, Jerry, was that, again, relative to the timing of our price increase, in March and April, we shipped -- in April, we made the last shipments of the orders of the pull-forward. So probably coming into the end of April, our distributors were sitting with -- we thought on average of about 60 days' inventory. Inventories came down nicely throughout the quarter. And as we said in our prepared remarks at the end of our third quarter, they're flat. We think that on average, they're flat year-over-year. And we also mentioned in our prepared remarks that we saw a nice pickup in orders in July. So what we think is a number of these orders that we saw picking up in July were driven by our distributors' need to restock. So I think that we got down to that where we may have expected some of those orders to be placed and shipped in June. And they happen to creep their way into July. So one quarter -- one month obviously doesn't make a quarter, but we saw that our Mueller Co. orders were up about 15% in July year-over-year. So, one, we think indicative of our distributors believing that the market -- they still expect to see nice market demand. And again, it was in our valves and hydrants business. So relative to the cadence, strong April on a year-over-year basis, saw that come down somewhat in May and June. But right now, seeing a -- at least in July, a nice uptick in July orders.

Next, we have Brent Thielman. Brent Thielman - D.A. Davidson & Co., Research Division: D.A. Davidson. Greg, just a clarification, did you say you expect metering to be profitable in Q4?

Right now, we expect that they will be, Brent, breakeven for the full year, and I think that our fourth quarter right now is dependent somewhat on the volume that we're -- that we book and ship. Even though our backlog is up about $5 million on a year-over-year basis, not all of that is scheduled to ship in the fourth quarter. So we're confident that Mueller Systems will be at least breakeven for the full year based on the profitability that we saw in the second and third quarter. Right now, I think our fourth quarter is the borderline relative to whether it will be profitable for the fourth quarter. Brent Thielman - D.A. Davidson & Co., Research Division: Got it. Okay. And then, Greg, what do you think caused your large customer in metering to kind of slow order intake this year?

I do think it was a -- I think that they took a good look at their inventory position in metering and thought that they could still meet their installation requirement this year and bring down that inventory. So I think it's somewhat we're seeing -- somewhat of a movement on their part this year to bring it down. But as we look out I think to the following years, in future years, that there probably our demand in their installation schedule so our shipments and their installation schedule will be more closely aligned. And I think this year, we're just seeing with their correcting and bringing down inventories. Brent Thielman - D.A. Davidson & Co., Research Division: Okay. And then just the higher-level view at the technology businesses. Do they require significant capital from here in order to further increase your market share?

Brent, as we sit here today, we don't think it requires a significant amount of capital. But as I said in our prepared remarks, we were really encouraged with the couple of our international wins this quarter. And as we turn our attention more and more to the international opportunities because we believe the leak detection market is bigger outside the U.S, as we look at those opportunities, we'll make an assessment relative to potential capital needs. But I would say, as we sit here today, a lot of our R&D spending for the product line that we have today, we've already incurred, but I think that if we do see higher capital needs, it will be associated with the strategy to going after a larger percentage of the market and more likely, that could be outside the U.S.

Noah Kaye, your line is open.

It's with Northland Capital Markets. Let me just pick up right there actually. The comments made earlier about seeing an improved margin mix shift in metering systems and talking, as you did, giving good color, leak detection demand. Can you help us understand a little bit what we could expect in terms of margin profiles going forward, in particular, what you're seeing in terms of demand shifting from -- to some extent, from AMR to AMI and the ability to potentially bundle them in some cases with leak detection? How do you expect that to impact the margin shift going forward?

Yes, good question. Certainly, and I think we've been pretty consistent when talking about Mueller Systems that we are in a transitioned period of moving more and more to AMI. We certainly saw that in our mix in the third quarter because we shipped most of the Jackson, Mississippi orders, which was all AMI, and additionally, Remote Disconnect Meters, which are a higher-margin product. As we look out over the next couple of years, we expect that in the water meter market that AMI will grow at a much faster rate than AMR and certainly, mechanical meters. We see projections where that may grow as much as 20% per year. If we're able to win our share of those projects, then we will clearly see an improving margin profile because of the mix to AMI. We think that could be further enhanced by incorporating a 24/7 distribution leak detection, which we'll communicate over that same network that the meters are -- the same network that the meters are communicating over. We have, as we said in our prepared remarks, we have just made that product commercially available. We have gone through some pilot systems, we're very encouraged with the results. So we do think that there is a significant opportunity for margin improvement when we combine AMI metering and add fix leak detection to that same network. We're not necessarily saying that we'll see a lot of that 2015. I think we'll still be in the process of educating our customers. I think we'll probably still need to do a couple of pilots, but as we look over the next several years, we do think that there is a nice opportunity for margin expansion by certainly combining fixed distribution leak detection with AMI metering solutions.

Right. And just as a follow-up, I know you're active at Utility Week. You're looking to international markets. You're generating very nice free cash flows now. How should we be thinking about the acquisition space, and in particular, the international acquisition opportunity? How are you looking at that these days?

Yes, I would say that on the acquisition front, we're certainly feeling a little more comfortable with our net debt leverage. As I said, we expect to see another strong quarter of free cash flow in our fourth quarter and overall free cash flow to be up at least 15% year-over-year. Evan talked a little bit of our flexibility with respect to debt retirement, and -- but we continue to monitor our cash position, evaluate our capital structure. I think that on the acquisition front, that if we saw the right opportunity, we would look very closely. And we'd be looking for anything in our -- certainly in our core water infrastructure business. But I think more specifically, that anything that we could add to our technology on the smart metering or leak detection, then that would be a very high in our priority list. And when we look it, as I mentioned earlier, when we look at leak detection and pipeline condition assessment, we've been in this business now for 2.5 to 3 years. We've been come up a learning curve. We're now learning more and more about not only North America market but the global market. We do see some really nice opportunities in the global market, so I would say that if we found a technology or a target that had a nice market position in leak detection outside the U.S. that I think that, that will be one that we would look very seriously -- consider very seriously.

Next, we have Walter Liptak.

Just wanted to ask you a follow-on to the comments on going global with some of the leak detection and other systems. Is this a -- can you frame this for us a little bit better? Is this a new initiative? Does it require new sales people? Are there technology differences, costs that may be impacting fourth quarter 2015?

Yes, well, thanks. Yes, we don't see really an impact on the fourth quarter. We'll assess -- we're assessing. I would say that it's probably a continuation of the initiatives that we've been starting for the last 12 months. But as we get more confident and encouraged about the technology we've developed, I think that we could see that we add to our sales efforts internationally. Again, as I mentioned, we had 2 nice awards this year -- I mean, I'm sorry, this quarter. And that we estimate that the international market leak detection market today could be as much as 9x to 10x larger than the North American market. So it will be, I think, slower to develop. I think today that we do have technologies that we can sell and provide to our customers internationally. But as I referenced, the 24/7 leak detection remains in distribution. That communicates over a network that we've developed for our smart metering. To offer that technology around the -- outside the U.S., it would take some investments in developing the right communication system. We're not projecting right now that we have a pile -- an increase in expenses for 2015 or 2016, but it's something that I think that we feel very comfortable to put together the plan to go after that market. And it could add in the next couple of years to our expenses to go after that market.

Okay. But it sounds like in 2015, it'll just be international sales, they have -- just some people. Is that right?

I would say, for -- we probably -- it will be difficult for us to have a system developed to go after a fixed communication leak detection network outside the U.S. But I think that there is opportunity for us to pick up with some of our existing technology, and we could very well be adding to our sales efforts outside the U.S. in 2015.

David Rose, your line is open.

Wedbush Securities. I have follow-up questions. On the SG&A reduction, you mentioned reduced professional fees. I'm assuming that doesn't go up again, are there any other items that potentially could go up? Is this temporary or permanent? And then, maybe you can kind of touch on the ERP implementation? I think you called it out, that some of the headwinds combined with the Anvil disruptions last quarter, did you see much of that this quarter?

Well, with respect to the ERP implementation at our Anvil business, we referenced that kind of in discussion around some of the operational inefficiencies, really just exacerbated as we were implementing the ERP at Columbia, our largest facility at that time. But the system is up and running at Columbia and running smoothly, we're about a year into the overall ERP implementation and are continuing to some other locations, but we have our largest facility complete, and that's running well. With respect to the improvement in SG&A on a year-over-year basis, from 19% of net sales last year to 17.4% of net sales this year. I referenced some lower professional fees and some employee-related cost that are down quite on a year-over-year basis. Certainly, we're focusing on managing SG&A and lowering that overall percentage of net sales. We can be subject to certain fluctuations from time to time depending upon certain initiatives in certain projects. But that is a focus, and I don't see any significant large-scale items that would move in significantly, just normal fluctuations from quarter-to-quarter.

So this is sort of a trend line for now?

Third quarter, I would say roughly a trend line but certainly, there's a bit of a seasonal nature to our business, so depending upon what can happen with the earnings and certain initiatives, you can see a little bit of volatility, a little bit of movement there. But I would say, in this general range, yes, that would be roughly a trend line.

Okay, and then, quickly, if you could, please. On Pratt, you called out some of the weakness before in some of the end markets, like treatment -- waste water treatment, the markets. Is there something, another dynamic within Pratt, I mean, are there some other end markets you want to call out? I mean, there's a small percentage that goes into power, is there anything else that you see that's making it a little bit weaker? And do you see the outlook improving? Obviously, you called out MRO, but sort of bigger projects, do you see them working through the pipeline?

Yes, that's a good question and good insight. Actually, when you look at a year-over-year basis, some of our difficulty in comparison was that in the third quarter last year, we shipped over $2 million to a nuclear plant. Those are spotty and so on. So when we look at a year-over-year basis actually, our third quarter last year was among our highest for Pratt primarily because of the shipments in the power industry did -- into the new one nuclear plant, did bump up our shipments for the third quarter last year. Actually, I think the trend we're seeing is more positive. Lately, our quotation activity for the last 6 months has been up almost 12% on a year-over-year basis to treatment plant work, and our orders were up 10% in the third quarter on a year-over-year basis. So that added to our backlog. These can be -- Pratt can be certainly is our one business or one product offering where delivery lead times are longer. These can be more associated with major projects and can be in our backlog for 12 to 14 months. So I think we're in a period where we're seeing reduced water treatment work, albeit I would say the most recent indicators are positive judging from our quotation activity and actual orders that we received in the third quarter. But it will always be spotty relative to when we do have a power plant work, and those tend to be nuclear, which also tend to be larger dollar volume projects.

Okay, I appreciate that. And if I can slip last one. Did you see any pickup in inquiries after the pipe burst in Westwood, California?

Not yet. It's probably a little too soon as it's been digested. But I think that this event highlights, we think, the potential damage situation and safety issues surrounding critical main. And it highlights some of the issues, municipalities across the country, save the managing -- aging water infrastructure. When you look at -- and why I talk about our 24/7 leak detection for transmission, this is the exact type of application that we designed this for, to be able to on a critical main -- that a critical transmission pipeline, that where it's located and the volume of water going through it that if it bursts like we saw in, out in Los Angeles, that the -- life is in jeopardy, property is in jeopardy. And so we designed it to be put on those kinds -- and maybe we have to make for -- the transmission side that maybe 10% off all transmission lines will be candidate for this type of technology. But that's exactly the type of situation that we designed this technology. So we've gone through, as I said, we've gone through the pilot stage. We're in the stage now of actually issuing some quotations, and it exists the issue in Los Angeles obviously got so much publicity that we wouldn't be surprised if it heightened the interest in this leak detection technology.

Our final question today comes from Joe Giordano.

It's Cowen and Company. Just a quick one on Mueller Co. just to help bridge the gap here a little bit. So shipments up 28%, pricing adding about 100 bps, I know the Systems business was flat. But what else was -- what are the other like negative offsets to get to like the 7.4% for the year-on-year comp?

Yes, the -- when I look at -- I think that, Joe, falls in two categories. One, going into the quarter, we would have expected to see an uptick in orders coming from our largest meter customer, especially coming out of -- going into the construction season and coming off a harsh winter. We did see sequentially a bit of an uptick but not to the level that we expected. That's probably accounted for even -- more than half of the shortfall from the 10%. The other came from, and I also mentioned this a little earlier, is that our distributors had, we think, probably about the end of April, 60 days in inventory, as a result of our shipping the last orders from the pull-forward of the price increase. They did bring those down throughout the quarter. We saw restocking orders coming in July where we had a nice uptick in July. We would've thought maybe a few of those distributors would've placed some of those orders in June, and we would've shipped those in June. So all in all, nothing that we saw that was a concern. Certainly, we have adjusted our outlook relative to Mueller Systems for the third, fourth quarter, based now on our expectations of our orders from our largest meter customer. And we think on the Mueller side, we're still seeing, as we said in our prepared remarks, a nice demand both from municipal and residential construction.

Okay, great. And then on -- so for Systems in the metering side, I think that's a roughly about 15% of Mueller Co., right? And how big is it -- how big would you say the pipe condition assessment leak detection business is right now?

Yes, if you look at the Mueller Systems, it's probably trending less than 10%. Our leak detection business is still running in the, say, the $12 million on annual basis, $12 million to $14 million in revenue. So obviously, a small part of overall Mueller.

Okay. And then, last question. To think a high level. And when we talk about the improvement in construction that we've seen a little bit recently, most of that growth has been in multifamily construction. So can you talk about how that shift impacts you guys and your outlook going forward?

Well, if we see a significant shift, we'll still see a demand for valves and hydrants. But certainly not to the same extent as we would see on a development where you -- every -- it can vary by locale. But you might see a hydrant every 300 yards and then the valves associated with that hydrant down in the distribution line. So clearly, non-res construction on multifamily, there'll be less demand for our products than there would be for single-family construction.

And that does end the Q&A session of today's conference.

Well, that concludes our call, today's call. Again, thank you for your interest in Mueller Water Products and for joining us this morning.

Thank you all for joining. You may now disconnect.